Question

2. Balance sheet 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. Cute Camel Woodcraft CompanyBalance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Liabilities and equity Assets Current liabilities: Current assets: Cash and equivalents Accounts payable $0 $6,457 $0 Accounts receivable Accruals 2,953 2,363 410 6,930 Notes payable Inventories 8,662 2,324 2,187 Total current assets $19,687 $15,750 Total current liabilities $2,187 Net fixed assets: Long-term debt 8,203 6,563 Net plant and equipment Total debt $19,250 $10,937 $8,750 Common equity: Common stock 21,328 17,063 Retained earnings 9,187 Total common equity $32,813 $26,250 Total liabilities and equity Total assets $35,000 $43,750 $35,000 $43,750 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 net collection of inventory items increased by more than the firm sold between Years 1 and 2. This statement is because: The accruals balance decreased by $410 million between Years 1 and 2 Total inventories of raw materials, work-in-process, and final goods decreased by $1,732 million between Year 1 and Year 2 Total inventories of raw materials, work-in-process, and final goods increased from $6,930 million to $8,662 million between Year 1 and Year 2

Answer 1

rate positively ..

		Balance sheet
				Year 2	Year 1			Year 2	Year 1
		Assets					Liabilities and equity
		Current asset					Current liabilities
		Cash and equivalents- Note -1	8072	6457		Account payable	0	0
		Account receivable		2953	2363		Accruals	410	0
		inventories		8662	6930		Notes payable	2324	2187
		Total current assets		19687	15750		Total current liabilities note -3	2734	2187
							Long term debt	8203	6563
		Net fixed asset					Total debt	10937	8750
		Net plant and equipment - Note 2	24063	19250		Common equity :
							Common stock	21328	17063
							Retained earning note -4	11485	9187
							Total common equity	32813	26250
		Total Assets		43750	35000		Total liabilities and equity	43750	35000
		Cash and equivalents- Note -1
		Total current assets		19687
	Less	Account receivable		2953
	Less	inventories		8662
				8072
		Net plant and equipment - Note 2
		Total Assets		43750
	Less :	Total current assets		19687
				24063
		Total current liabilities note -3
		Account payable	0
	Add	Accruals	410
	Add	Notes payable	2324
		Total current liabilities	2734
		Retained earning note -4
		Total common equity	32813
	Less	Common stock	21328
		Retained earning	11485
	Statement #1
		Statement is True :
		Total inventories of raw material work in process and final goods decreased by 1732million between year 1 and 2
	Statement #2
		Statement is True :
		Green caterpillar's retained earning account increased between the end of year 1 and 2
	Statement #3
		Statement is False :
		Common stock holder are treated as residual investor.
	Answer last question :
	Likely to INCREASE if the firm issues 3million of new common stock