Ch $06$: Assignment $-$ Accounting for Financial Management Statement #$1$: Cute Camel's accumulated owed financial obligations decreased from Year $1$ to Year $2.$

This statement is

$,$ because:

Long$-$term debt decreased from $$1,992$ million at the end of Year $1$ to $$1,875$ million by the end of Year $2.$

Accruals actually increased from $$0$ in Year $1$ to $$352$ million at the end of Year $2.$

Notes payable actually increased from $$1,992$ million to $$1,875$ million between Years $1$ and $2.$

Statement #$2$: On December $31$ of Year $2,$ Cute Camel Woodcraft Company had $$6,919$ million of actual money that it could have spent immediately.

This statement is

$,$ because:

Cute Camel's Year $2$ cash and equivalents balance is $$17,415.$

The funds recorded in Cute Camel's accounts receivable account represents funds that are either cash or can berted into cash

almost immediately.

The funds recorded in Cute Camel's cash and equivalents account represents funds that are either cash or can be converted into cash

almost immediately.

Statement #$3$: If Cute Camel ever goes bankrupt, its common shareholders will be paid off first, then its debtholders and preferred stockholders.

This statement is

$\_,$ because:

Common shareholders are treated as residual investors.

Debtholders are treated as residual investors.

Debtholders and preferred shareholders are considered residual investors.

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

r if the firm buys a new plant and equipment

at a cost of $$1$ million with liquid capital.

$2.$ Balance sheet

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.

Cute Camel Woodcraft Company 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.

Cute Camel Woodcraft Company Balance Sheet for Year Ending December $31$

$\backslash$table$[[($Millions of Dollars$)],[,$Year $2,$Year $1,,$Year $2,$Year $1],[$Assets$,,,$Liabilities and equity$],[$Current assets:,,,Current liabilities:$],[$Cash and equivalents,$$,$$$5,535,$Accounts payable,$$0,$$$0],[$Accounts receivable,$2,531,2,025,$Accruals,$$352,$$$0],[$Inventories$,7,425,5,940,$Notes payable,$$1,992,$$$1,875],[$Total current assets,$$16,875,$$$13,500,$Total current liabilities,$$,$$$1,875],[$Net fixed assets:,,,Long$-$term debt,$7,031,5,625],[$Net plant and equipment,,$16,500,$Total liabilities,$$9,375,$$$7,500],[,,$Common equity:$],[,,$Common stock,$$18,281,$$ $14,625],[,,$Retained earnings,$$,$$$7,875],[,,$Total common equity,$$28,125,$$$22,500],[$Total assets,$$37,500,$$$30,000,$Total liabilities and equity,$$37,500,$$$30,000]]$

Given the information in the preceding balance sheet$-$and assuming that Cute Camel Woodcraft Company 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 #$1$: Cute Camel's accumulated owed financial obligations decreased from Year $1$ to Year $2.$