Question

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 Assets L es and equity Current assets Current liabilities: 58,072 Cash and equivalents Accounts receivable Inventaries 2,953 410 Accounts payable Accruas Notes payable Total current lates 8,662 2.324 2167 Total current assets $19.687 $15.750 Net foued assets Long-term debt Total debt 8,203 $10,937 $2.187 6,563 $8.50 Net plant and equipment $24.063 519,250 Common equity Common stock 21.328 Retained earnings 17,063 9.187 $26,250 $35.000 Totalcommon equity Total liabilities and equity $32,813 543,750 Total assets $43.750 $35,000 Given the information in the preceding balance sheet-and assuming that Blue Hamster Manufacturing Inc. has 50 milion 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

Answer 1

statement 1-	Blue Hamster's accumulated owed financial obligation decreased from year 1 to year 2	This statement is false	because accruals actually increased from $ 0 in year 1 to $ 410 at the end of year 2
statement 2-	On december 31 of year 2, Blue Hamster manufacturing inc. had $ 8072 millions of actual money that it could have spent immedieately	This statement is true	because the fund recorded in Blue Hamster's cash and equivalent account represents funds that are either cash or can be converted into cash almost immedieatly
statement 3-	The book value of one of the Blue Hamster's fixed asset is calculated as the original cost of the assets minus its annual depreciation expense	This statement is incorrect	because an asset's net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation cost