The balance sheet provides a snapshot of the financial condition of a company. I
ID: 2335488 • Letter: T
Question
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 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 Current assets Liabilities and equity Current liabilities: Cash and equivalents Accounts receivable Inventories $7,380 Accounts payable $0 469 2,656 $0 2,700 7,920 $18,000 Accruals 3,375 9,900 $22,500 Notes payable 2,500 $2,500 7,500 $10,000 Total current assets Total current liabilities Net fixed assets: Long-term debt 9,375 $12,500 Net plant and equipment $22,000 Total debt Common equity: Common stock 24,375 19,500 10,500 $30,000 $40,000 Retained earnings Total common equity $37,500 $50,000 Total assets $50,000 $40,000 abilities and equityExplanation / Answer
Year -2
cash and equivalent
total current assets-accounts receivables-inventories
22500-3375-9900
9225
net plant and equipment
total assets-total current assets
50000-22500
27500
total current liabilities
total debt-long term debt
12500-9375
3125
retained earning
total common equity-common stock
37500-24375
13125
1-
FALSE
because accruals actually increased from 0 in year 1 to 469 million at the end of year 2
2-
TRUE
cold goose retained earning account increased between the end of year 1 & 2
3-
FALSE
common shareholders are treated as residual investors
4-
company assets should be listed in the order in which they are to be converted into cash
Year -2
cash and equivalent
total current assets-accounts receivables-inventories
22500-3375-9900
9225
net plant and equipment
total assets-total current assets
50000-22500
27500
total current liabilities
total debt-long term debt
12500-9375
3125
retained earning
total common equity-common stock
37500-24375
13125
1-
FALSE
because accruals actually increased from 0 in year 1 to 469 million at the end of year 2
2-
TRUE
cold goose retained earning account increased between the end of year 1 & 2
3-
FALSE
common shareholders are treated as residual investors
4-
company assets should be listed in the order in which they are to be converted into cash
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