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 companys 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 assets:			Current liabilities:
Cash and equivalents		$7,380	Accounts payable	$0	$0
Accounts receivable	3,375	2,700	Accruals	469	0
Inventories	9,900	7,920	Notes payable	2,656	2,500
Total current assets	$22,500	$18,000	Total current liabilities		$2,500
Net fixed assets:			Long-term debt	9,375	7,500
Net plant and equipment		$22,000	Total debt	$12,500	$10,000
			Common equity:
			Common stock	24,375	19,500
			Retained earnings		10,500
			Total common equity	$37,500	$30,000
Total assets	$50,000	$40,000	Total liabilities and equity	$50,000	$40,000

Given the information in the preceding balance sheetand assuming that Green Caterpillar Garden Supplies Inc. has 50 million shares of common stock outstandingread each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet.

Statement #1:Green Caterpillars pool of relatively liquid assets, which are available to support the companys current and future sales, decreased from Year 1 to Year 2.

This statement is , because:

Green Caterpillars total current asset balance actually increased from $18,000 million to $22,500 million between Year 1 and Year 2

Green Caterpillars total current liabilities balance increased from $2,700 million to $3,375 million between Year 1 and Year 2

Green Caterpillars total current liabilities balance decreased by $4,500 million between Year 1 and Year 2

Statement #2: On December 31 of Year 2, Green Caterpillar Garden Supplies Inc. had $9,225 million of actual money that it could have spent immediately.

This statement is , because:

The funds recorded in Green Caterpillars accounts receivable account represents funds that are either cash or can be converted into cash almost immediately

Green Caterpillars Year 2 cash and equivalents balance is $23,220

The funds recorded in Green Caterpillars cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately

Statement #3: The book value of one of Green Caterpillars fixed assets is calculated as the original cost of the asset minus its annual depreciation expense.

This statement is , because:

An assets net book value is calculated by subtracting its annual depreciation expense from its total historic and installation costs

An assets net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs

An assets 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 on 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)?

The companys debts should be listed from those carrying the largest balance to those with the smallest balance.

The companys debts should be listed in order of their liquidity.

The companys debts are listed in the order in which they are to be repaid.