ools 2. Balance sheet Aa 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 Fuzzy Button Clothing 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. Year 2 Year 1 $0 $0 352 0 1,992 Fuzzy Button Clothing Company Balance Sheet for Year Ending December 31 (Millions of dollars) Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: Cash and equivalents $5,535 Accounts payable Accounts receivable 2,531 2,025 Accruals Inventories 7,425 5,940 Notes payable Total current assets $16,875 $13,500 Total current liabilities Net fixed assets: Long-term debt Net plant and equipment $16,500 Total debt Common equity: Common stock Retained earnings ORI 1,875 $1,875 7,031 5,625 $7,500 $9,375 Activate Windo Go to Set 18,281 14,625 7,875 arch Se Ch 03: Homework - Financial Statements, Cash Flow, and Taxes LOTITIOIT SUCK Retained earnings Total common equity Total assets $37,500 $30,000 Total liabilities and equity 10,201 $28,125 $37,500 7,875 $22,500 $30,000 Given the information in the preceding balance sheet-and assuming that Fuzzy Button Clothing 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: Fuzzy Button's accumulated owed financial obligations decreased from Year 1 to Year 2. This statement is because: The accounts payable account remained $0 for both Years 1 and 2 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 Statement #2: On December 31 of Year 2, Fuzzy Button Clothing Company had $6,919 million of actual money that it could have spent immediately. This statement is because: O Fuzzy Button's Year 2 cash and equivalents balance is $17,415 The fundo del US Homework - Financial Statements, Cash Flow, and Taxes Fuzzy Button's Year 2 cash and equivalents balance is $17,415 The funds recorded in Fuzzy Button's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately The funds recorded in Fuzzy Button's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately dy Tools Tips Tips Statement #3: If Fuzzy Button ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. This statement is because Debtholders are treated as residual investors Debtholders and preferred shareholders are considered residual investors Common shareholders are treated as residual investors Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Fuzzy Button Clothing Company's balance sheet is consistent with US Generally Accepted Accounting Principles (GAAP)? The company's debts are listed in the order in which they are to be repaid. The company's debts should be listed in order of their liquidity. The company's debts should be listed from those carrying the largest balance to those with the smallest balance. Activate Cato Sci