The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company's financial condition and performance. Cute Camel Woodcraft Company is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheets for Cute Camel Woodcraft Company for the years ending December 31 , Year 2 and 1 , respectively. Cute Camel Woodcraft Company Balance Sheet For the Year ended December 31 Given the information in the preceding balance sheet-and assuming that Cute Camel Woodcraft Company has 50 million shares of common stock outstanding -read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet. Statement \#1: Cute Camel's net collection of inventory items increased by more than the firm sold between Years 1 and 2. This statement is , because: The accounts receivable balance increased by $3,375 between Years 1 and 2 . The accruals balance decreased by $2,344 between Years 1 and 2 . Total inventories of raw materials, work-in-process, and final goods increased from $39,600 to $49,500 between Year 1 and Year 2 . Total inventories of raw materials, work-in-process, and final goods decreased by $9,900 between Year 1 and Year 2. This statement is , because: The accounts receivable balance increased by $3,375 between Years 1 and 2 . The accruals balance decreased by $2,344 between Years 1 and 2 . Total inventories of raw materials, work-in-process, and final goods increased from $39,600 to $49,500 between Year 1 and Year 2 . Total inventories of raw materials, work-in-process, and final goods decreased by $9,900 between Year 1 and Year 2. Statement \#2: On December 31 of Year 2, Cute Camel Woodcraft Company had $46,125 of actual money that it could have spent immediately. This statement is , because: The funds recorded in Cute Camel's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately. The funds recorded in Cute Camel's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately. Cute Camel's Year 2 cash and equivalents balance is $116,100. Statement \#3: If Cute Camel ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. This statement is , because: Common shareholders are treated as residual investors Debtholders are treated as residual investors Debtholders and preferred shareholders are considered residual investors Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Cute Camel Woodcraft Company's balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? The company's debts should be listed from those carrying the largest balance to those with the smallest balance. The company's debts are listed in the order in which they are to be repaid. The company's debts should be listed in order of their liquidity
