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. Cute Camel Woodcraft Company 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. Given the information in the preceding balance sheet-and assuming that Cute Camel Woodcraft Company 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: Cute Camel's accumulated owed financlal obligations decreased from Year 1 to Year 2. This statement is , because: Accruals actually increased from $0 in Year 1 to $234 million at the end of Year 2. The accounts payoble account remained $0 for both Years 1 and 2 . Long-term debt decreased from $1,328 million at the end of Year 1 to $1,250 million by the end of Year 2. Statement \#2: Over the past two years, Cute Camel Woodcraft Company has relied more on the use of short-term debt than on long-term debt financing. This statement is , because: Cute Camel's total current liabilities increased by $312 million, while its use of long-term debt increased by $938 million. Cute Camel's total notes payable increased by $78 million, while its common stock account increased by $2,438 million. Cute Camel's total current liabilities decreased by $312 million, while its long-term debt account decreased by $938 million. Statement \#3: If Cute Camel ever goes bankrupt, its common shareholders will be paid off first, then its debtholders and preferred stockholders. This statement is - because: Common sharehoiders are treated as residual investors. Debtholders are treated as residual investors. Debtholders and preferred shareholders are considered residual investors. 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 company's debts should be listed from those carrying the largest balance 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
