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 condion and performance. Cute Camel Woodcrant Company is a typothetical company. Suppose it toas the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are stili incomplete. Use the information given to complete the balance sheet: Given the information in the preceding talance sheet-and assumving that Cule Camel woodcraft Congany has 50 milion shares of common stock outstanding-read each of the following statemenks, then identify the selection that bost interprets the information conveyed by the balance sheet Statement # 1. Cute Camei's net collection of inventory items increased by more than the firm's sales between Years 1 and 2 . Total inventories of raw materiais, work-in-process, and final goods increased from $2,970 million to $3,712 million between Year 1 and Yeat 2 Total inventories of raw materials, work-in-process, and final goods decreased by $742 million between Year 1 and Year 2 The accruals balance decreased by $176 million between Years 1 and 2 Statement #2 in Year 2, Cute Camel Wooderaft Company was profitable: This-statement is , because: Cute Camel's retained earnings account increased between the end of Years: 1 and 2 The cash and equivalents account increased between Years 1 and 2 . Cute Camel's total assets increased between Years 1 and 2 Statement #3: One way to interpret the change in Cute Camel's accounts recelvable balance from Year 1 to Year 2 is that more customers purchased new items on credit rather than paying off existing credit accounts. This statement is , because: The change from $2,970 milion to $3,712 milion reflects a net accumulation of new credit sales The $253 increase in accounts receivable means either that Year 1 's existing credit customers are not paying off their owed balances and new or existing customers are making additional purchases on credit, or that Year 1 's credit customers have repaid their owed balances and Year 2 credit sales have excecded Year 1 's credit sales The decrease from $1,266 million to $1,013 mition implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit 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 compary's debts should be tisted from those carrying the targest batance 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
