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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.

Blue Hamster Manufacturing 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.

Blue Hamster Manufacturing Inc. Balance Sheet for Year Ending December $31$ Statement #$1$: Blue Hamster's accumulated owed financial obligations decreased from Year $1$ to Year $2.$

This statement is$,$ because:

Notes payable actually increased from $$996$ million to $$937$ million between Years $1$ and $2.$

Long$-$term debt decreased from $$996$ million at the end of Year $1$ to $$937$ million by the end of Year $2.$

Accruals actually increased from $$0$ in Year $1$ to $$176$ million at the end of Year $2.$

Statement #$2$: Over the past two years, Blue Hamster Manufacturing Inc. has relied more on the use of short$-$term debt than on long$-$term debt

financing.

This statement is $,\_,$ because:

Blue Hamster's total current liabilities increased by $$235$ million, while its use of long$-$term debt increased by $$702$ million.

Blue Hamster's total current liabilities decreased by $$235$ million, while its long$-$term debt account decreased by $$702$ million.

Blue Hamster's total notes payable increased by $$59$ million, while its common stock account increased by $$1,828$ million.

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

This statement is

$,$ because:

Debtholders are treated as residual investors.

Common shareholders are treated as residual investors.

Debtholders and preferred shareholders are considered residual investors.

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