FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 | |
| 2,109 | 1,688 | Accruals | 293 | 0 | |
| Inventories | 6,187 | 4,950 | Notes payable | 1,660 | 1,562 |
| Total current assets | $14,062 | $11,250 | Total current liabilities | $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 | |||
| 6,562 | |||||
| Total common equity | $23,438 | $18,750 | |||
| Total assets | $31,250 | $25,000 | Total liabilities 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 liabilities balance decreased by $2,812 million between Year 1 and Year 2
Cold Goose’s total current asset balance actually 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 Year 2
Statement #2: In Year 2, Cold Goose Metal Works Inc. was profitable.
This statement is, because:
The cash and equivalents account increased between Years 1 and 2
Cold Goose’s retained earnings account increased between the end of Years 1 and 2
Cold Goose’s total assets increased between Years 1 and 2
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