answer the statement #1 and 2 and 3 and answer Based on you understanding of the

Question

answer the statement #1 and 2 and 3
and answer Based on you understanding of the different....................

Attempts Keep the Highest: 11 2. Balance sheet A 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 Green Caterpillar Garden Supplies 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. Green Caterpillar Garden Supplies Inc. Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 1 Year 2 Year 1 Assets Liabilities and equity Current liabilities: Current assets: Cash and equivalents$1,384 $1,107 Accounts payable $0 70 399 $0 Accounts receivable Inventor 506 1,485 405 Accruals 1,188 Notes payable 375 $2,700 Total current lablitis$469$375 Total current assets Net fixed assets: Long-term debt 1,406 1,125 Net plant and equipment $4,125 3,300 Total debt $1,875 $%1,500 Common equity Common stock Retained earnings Total common equity $7,500 $6,000 Toal liabilities and eq 3,656 V1,969 $5,625 $7,500 2,925 1,575 $4,500 $6,000 Total assets Given the information in the preceding balance sheet-and assuming that Green Caterpillar Garden Supplies 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: Green Caterpillar's net collection of inventory items in between Years 1 and 2 ased by more than the firm sold

Explanation / Answer

(1) Net Collection of Inventory usually refers to the post adjustment value of a firm's inventory account on the balance sheet. Inventory. The value of the inventory account would increase during a year only when the increment is more than what the firm sold in that particular year. As the inventory of the firm increased from $ 1188 million to $ 1485 million, the increment would be more than the amount sold. Further, the terms raw material, work-in-progress and final goods are types of inventory.

Hence, the statement is true and the reason is option (C).

(2) The given statement is true because of the firm witnessing an increment in retained earnings. An increment in total assets can be financed with either liability or equity and hence does not imply if the firm was profitable or not. Cash and Cash Equivalents can increase due to increase in cash flow from financing and investment activities and not necessarily operating activities. The retained earnings head, however, is entirely constituted of a portion of the firm's net income and cannot increase unless the net income is positive.

Hence, the statement is true because of option (B).

(3) Fixed assets are listed as Net Fixed Assets which is calculated by subtracting Accumulated Depreciation from the Initial Cost of the firm's Fixed Assets. Hence, the given statement is false because of option (C).

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