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. Blue Hamster Manufacturing 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. Blue Hamster Manufacturing 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: Accounts payable Cash and equivalents $4,612 $0 $0 2,109 1,688 Accruals 293 0 Accounts receivable Inventories 6,187 4,950 1,660 1,562 Notes payable Total current liabilities Total current assets $14,062 $11,250 $1,562 Net fixed assets: Long-term debt 5,859 4,688 Net plant and equipment $13,750 Total debt $7,812 $6,250 Common equity: Common stock 15,235 12,188 Retained earnings 6,562 Total common equity $23,438 $18,750 Total assets $31,250 $25,000 Total liabilities and equity $31,250 $25,000 Given the information in the preceding balance sheet-and assuming that Blue Hamster Manufacturing 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: Blue Hamster's net collection of inventory items increased by more than the firm sold between Years 1 and 2. This statement is because: O Total inventories of raw materials, work-in-process, and final goods increased from $4,950 million to $6,187 million between Year 1 and Year 2 Total inventories of raw materials, work-in-process, and final goods decreased by $1,237 million between Year 1 and Year 2 O The accruals balance decreased by $293 million between Years 1 and 2 Statement #2: On December 31 of Year 2, Blue Hamster Manufacturing Inc. had $5,766 million of actual money that it could have spent immediately. This statement is because: O Blue Hamster's Year 2 cash and equivalents balance is $14,512 The funds recorded in Blue Hamster's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately The funds recorded in Blue Hamster's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately Statement #3: The book value of one of Blue Hamster'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 annual 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 An asset's net book value is calculated by subtracting its accumulated 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 Blue Hamster Manufacturing 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 alphabetical order. The company's assets should be listed in the order in which they are to be converted into cash
