Points given for right answers Part 2- 2. Balance sheet Aa Aa The balance sheet
ID: 2820026 • Letter: P
Question
Points given for right answers Part 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 company's financial condition and performance. Cold Goose Metal Works 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. Cold Goose Metal Works Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Liabilities and equity Current liabilities: Assets Current assets: Cash and equivalents, Accounts receivable Inventories l $3.690 Accounts payable $0 234 1,328 $0 1,350 Accruals 3,960 Notes payable 4,950 $11,250 1,250 $1,250 3,750 $5,000 Total current assets $9,000 Total current liabilities Long-term debt Common equity: Net fixed assets: 4,688 $6,250 Net plant and equipment $11,000 Total debt Common stock 9,750 5,250 $15,000 $20,000 12,188 Retained earnings Total common equity $18,750 $25,000 Total assets $25,000 $20,000 Total liabilities and equity
Explanation / Answer
Statement 1 is correct because Cold Goose's total current assets balance actually increased from $9,000 millionsto $11,250 millions between year 1 and year 2.
Hence, correct option is (b)
Statement 2 is correct because the funds recorded in Cold Goose's cash and cash equivalent account represents funds that are either cash or can be converted into cash almost immediately.
Total current assets = Cash and cash equivalents + Accounts receivables + Inventories
11,250 = Cash and cash equivalents + 1,688 + 4,950
Cash and cash equivalents = $4,612
Hence, correct option is (a)
Statement 3 is incorrect because an assets net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs.
Hence, correct option is (a)
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