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 Green Caterpillar Garden Supplies Inc. 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 sheet Green Caterpillar Garden Supplies Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current liabilities: Current assets: $0 410 2,324 $0 Cash and equivalents Accounts receivable Inventories $6,457 Accounts payable 2,953 8,662 $19,687 2,363 6,930 $15,750 Accruals 2,187 $2,187 6,563 $8,750 Notes payable Total current assets Total current liabilities 8,203 $10,937 Net fixed assets: Long-term debt Net plant and equipment $19,250 Total debt Common equity: 17,063 9,187 $26,250 $35,000 Common stock 21,328 Retained earnings Total common equity Total liabilities and equity $32,813 $43,750 Total assets $43,750 $35,000 Given the information in the preceding balance sheet-and assuming that Green Caterpillar Garden Supplies Inc. 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: Green Caterpillar's pool of relatively liquid assets, which are available to support the company's current and future sales, decreased from Year 1 to Year 2 This statement is , because O Green Caterpillar's total current liabilities balance increased from $2,363 million to $2,953 million between Year 1 and Year 2 Green Caterpillar's total current asset balance actually increased from $15,750 million to $19,687 million between Year 1 and Year 2 Green Caterpillar's total current liabilities balance decreased by $3,937 million between Year 1 and Year 2 Statement #2: Over the past two years, Green Caterpillar Garden supplies Inc. has relied more on the use of short-term debt than on long-term debt financing. This statement is , because Green Caterpillar's total notes payable increased by $137 million, while its common stock account increased by $4,265 million increased by $1,640 million decreased by $1,640 million O Green Caterpillar's total current liabilities increased by $547 million, while its use of long-term debt O Green Caterpillar's total current liabilities decreased by $547 million, while its long-term debt account Statement #3: The book value of one of Green Caterpillar's fixed assets is calculated as the original cost of the asset minus its annual depreciation expense. This statement is , because: O An asset's net book value is calculated by subtracting its annual depreciation expense from its total historic and installation costs O An asset's net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs O An asset's net book value is calculated by adding its annual depreciation expense to its total historic and installation costs Based on your understanding of the different items reported in the balance sheet and the information they provide, which statement regarding Green Caterpillar Garden Supplies Inc.'s balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? O The company's assets should be listed in alphabetical order. O The company's assets should be listed from those carrying the largest balance to those with the smallest balance. O The company's assets should be listed in the order in which they are to be converted into cash
