Balance Sheet The balance sheet provides a snapshot of the financial condition o

Question

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. 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 Liabilities and equity Current liabilities: Assets Current assets: Cash and equivalents Accounts receivable Inventories $9,225$7,380 Accounts payable $0 469 2,656 $3,125 9,375 $12,500 $0 0 2,500 $2,500 7,500 $10,000 3,375 9,900 $22,500 2,700 7,920 $18,000 Accruals Notes payable Total current assets Total current liabilities Net fixed assets: Long-term debt Net plant and equipment $27,500$22,000 Total debt Common equity: Common stock 24,375 13,125 $37,500 $50,000 19,500 10,500 $30,000 $40,000 Retained earnings Total common equity Total liabilities and equity Total assets $50,000 $40,000 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.

Explanation / Answer

Hi,

We will go statement by statement for each part.

Statement 1 )

It says Pool of relatively liquid asset decreased from Y1 to Y2

This statment is False becasue actually liquid asset increase from $18,000 to $22,550 from Y1 to Y2 if you see in balance sheet asset column so you will choose option 1 here,.

Statment 2) On years 2 it has $9,,225 of actual money that it can spend immediately

This statment is True becasue if you will see in balnce sheet for year 2, it has cas and equivalent =$9,225 which is same as real money Hence you will choose option 1 here

Statment 3) Book value per share is $750 per year for year 2

Formula for book value per share = Total book value of equity/ total no. of shres outstanding = 37500/50 = $750

hence statement is True , and option 2 is correct.

For 4 th question

we know that asset = liability+equity =

so if the firm issues $3 milion of common stock that means asset will have to increase by same amount and if only cash and equiavalent will change then it will also increase by $3 million

so new cash and equivalent = 9225+3 = 12,225 million

Thanks

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.