FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Given the information in the preceding balance sheet —and assuming that Blue Hamster Manufacturing 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:Blue Hamster’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 ----true or false???--- , because which one?
Blue Hamster’s total current liabilities balance decreased by $3,937 million between Year 1 and Year 2
Blue Hamster’s total current liabilities balance increased from $2,363 million to $2,953 million between Year 1 and Year 2
Blue Hamster’s total current asset balance actually increased from $15,750 million to $19,687 million between Year 1 and Year 2
Statement #2: Over the past two years, Blue Hamster Manufacturing Inc. has relied more on the use of short-term debt than on long-term debt financing.
This statement is --TRUE OR FALSE??? , because which one:
Blue Hamster’s total current liabilities decreased by $547 million, while its long-term debt account decreased by $1,640 million
Blue Hamster’s total current liabilities increased by $547 million, while its use of long-term debt increased by $1,640 million
Blue Hamster’s total notes payable increased by $137 million, while its common stock account increased by $4,265 million
Statement #3: The book value of one of Blue Hamster’s fixed assets is calculated as the original cost of the asset minus its annual depreciation expense.
This statement is---TRUE OR FALSE???--- , because which one?:
An asset’s net book value is calculated by subtracting its annual depreciation expense from its total historic and installation costs
An asset’s net book value is calculated by subtracting its accumulated depreciation expense from its total historic and installation costs
An asset’s net book value is calculated by adding its annual depreciation expense to its total historic and installation costs
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 (INCREASE, DECREASE, OR REMAIN THE SAME?) if the firm increases the dividends paid on its common stock.
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