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
Assets Liabilities and equity
Current assets: Current liabilities
Cash and equivalents $4,612 Accounts payable $0 $0
Accounts receivable 2,109 1688 Accruals 293 293
Inventories 6,187 4,950 Notes payable 1,660 1,562
Total current assets $14,062 $11,250 Total current abilities $1,562
Net fixed assets: Long-term debt 5,859 4,688
Net plant and equipment $13.750 Total debt $7,812 $6,250
Common equity
Common stock 15.235 12,188
Retained earnings 6,562
Total common equity $23,438 $18,750
Total assets $31,250 $25,000 Total abilities and equity $31,250 $25,000
Given the information in the preceding balance sheet—and assuming that Cold Goose Metal Works Inc. 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: Cold Goose’s pool of relatively liquid assets, which are available to support the company’s current and future sales, decreased from Year 1 to Year 2.This statement is , because:
Cold Goose’s total current asset balance increased from $11,250 million to $14,062 million between Year 1 and Year 2
Cold Goose’s total current liabilities balance increased from $1,688 million to $2,109 million between Year 1 and Year2
Cold Goose’s total current liabilities balance decreased by $2,812 million between Year 1 and Year 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:
Cold Goose’s total current liabilities increased by $391 million, while its use of long-term debt increased by $1,171 million
Cold Goose’s total current liabilities decreased by $391 million, while its long-term debt account decreased by $1,171 million
Cold Goose’s total notes payable increased by $98 million, while its common stock account increased by $3,047 million