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Correctly answer all parts of question #2
2. Balance sheet Aa Aa 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. Cold Goose Metal Works Inc. is a hypothetical company. Suppose it has the following balance sheet itens 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.
it has the following balance sheet items reported at the eu Cold Goose Metal Works Inc. is a hypothetical company, Suppose first year of operation. For the second year, some parts are stil incomplete. Use the information given to complete the balanoe sheet. Cold Goose Metal Works Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Current assets: Liabilities and equity Current liabilities: $5,535 Accounts payable $0 352 1,992 $0 0 1,875 $1,875 5,625 $7,500 Cash and equivalents Accounts receivable Inventories 2,531 7,425 2,025 Accruals 5,940 Notes payable Total current assets $16,875$13,500 Total current liabilities 7,031 $9,375 Net fixed assets: Long-term debt Net plant and equipment$16,500 Total dett Common equity: Common stock 18,281 14,625 Retained earnings 7.875 $28,125 $22,500 $37,500 $30,000 Total common equity Total assets 37,500 $30,000 Total liabilities and equity
Given the information in the preceding balance sheet-and assuming that Cold Goose Metal Works Inc. has 50 million s common stock outstanding-read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet. hares of Statement # 1: Cold Gooses accumulated owed financial obligations decreased from Year 1 to Year 2. This statement is because O Long-term debt decreased from $1,992 million at the end of Year 1 to $1,875 million by the end of Year Accruals actually increased from $0 in Year 1 to $352 million at the end of Year 2 O The accounts payable account remained $0 for both Years 1 and 2 Statement #2: Over the past two years, Cold Goose Metal works Inc. has relied more on the use of short-term debt than on long-term debt financing. This statement is ,because: O Cold Gooses total current liabilities decreased by $469 million, while its long-term debt account O Cold Gooses total notes payable increased by $117 million, while its common stock account increased O Cold Gooses total current liabilities increased by $469 million, while its use of long-term debt increased decreased by $1,406 million by $3,656 million by $1,406 million
Statement #3: One way to interpret the change in Cold Gooses accounts receivable balance from Year 1 to Year 2 is that more customers purchased new items on credit rather than paying off existing credit accounts This statement is , because: O The change from $5,940 million to $7,425 million reflects a net accumulation of new credit sales The decrease from $2,531 million to $2,025 million implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit O The $506 increase in accounts receivable means either that Year 1s existing credit customers are not paying off their owed balances and new or existing customers are making additional purchases on credit, or that Year 1s credit customers have repaid their owed balances and Year 2 credit sales have exceeded Year 1s credit sales Based on your understanding of the different items reported on the balance sheet and the information they provide, if everything else remains the same, then the cash and equivalents item on the current balance sheet is likely to buys a new plant and equipment at a cost of $1 million with liquid capital. if the firm remain the same increase decrease
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Answer #1

cash and cash equivalents

16875-25317425

6919

net plant and equipment

37500-16875

20625

total current liabilities

9375-7031

2344

retained earning

28125-18281

9844

statement 1 Is false

because long debt decreased from 1992 million at the end of year 1 to 1875 million by the end of year 2

statement 2 is false

cold goose total current liabilities increased by 469 while its use of long term debt increased by 1406

statement 3 is true

statement 3 support the argument

decrease because cash will go out and this will reduce the cash and cash equivalent
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