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. Cold Goose Metal Works 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. Cold Goose Metal Works Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: 52,767 SO $0 0 1,266 1,013 176 0 3,712 2,970 996 937 Cash and equivalents Accounts receivable Inventories Total current assets Net fixed assets: Net plant and equipment $8,437 $6,750 $937 3,515 2,813 Current liabilities: Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total debt Common equity: Common stock Retained earnings Total common equity Total liabilities and equity 58,250 $4,687 $3,750 9,141 7,313 3,937 $14,063 $11,250 Total assets $18,750 $15,000 $18,750 $15,000 Given the information in the preceding balance sheet-and assuming that cold Goose Metal Works 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: Cold Goose'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 Cold Goose's total current asset balance actually increased from $6,750 million to $8,437 million between Year 1 and Year 2. Cold Goose's total current liabilities balance decreased by $1,687 million between Year 1 and Year 2. O Cold Goose's total current asset balance decreased from $8,437 million to $6,750 million between Year 1 and Year 2. Statement #2: Over the past two years, Cold Goose Metal Works Inc. has relied more on the use of short-term debt than on long-term debt financing This statement is because Cold Goose's total current liabilities decreased by $235 million, while its long-term debt account decreased by $702 million. O Cold Goose's total notes payable increased by $59 million, while its common stock account increased by $1,828 million. O Cold Goose's total current liabilities increased by $235 million, while its use of long-term debt increased by $702 million. Statement #3: The book value of one of Cold Goose's fixed assets is calculated as the original cost of the asset minus its annual depreciation expense. This statement is because: An asset's net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs. An asset's net book value is calculated by adding its annual depreciation expense to its total historic and installation costs. An asset's net book value is calculated by subtracting its annual depreciation expense from 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 Cold Goose Metal Works Inc.'s balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)? The company's assets should be listed from those carrying the largest balance to those with the smallest balance. The company's assets should be listed in the order in which they are to be converted into cash. The company's assets should be listed in alphabetical order
