Answer:
the question is incomplete, so I looked for a similar one:
Statement #1: Green Caterpillar’s pool of relatively liquid assets, which are available to support the company’s current and future sales, decreased from Year 1 to Year 2.
This statement is <u>FALSE</u>, because:
- Green Caterpillar’s total current asset balance actually increased from $15,750 million to $19,687 million between Year 1 and Year 2
Statement #2: On December 31 of Year 2, Green Caterpillar Garden Supplies Inc. had $8,072 million of actual money that it could have spent immediately.
This statement is <u>TRUE</u>, because:
- The funds recorded in Green Caterpillar’s cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately
Statement #3: If Green Caterpillar ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders.
This statement is <u>INCORRECT</u>, because:
- 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, if everything else remains the same, then the cash and equivalents item on the current balance sheet is likely to <u>INCREASE</u> if the firm issues $3 million of new common stock.
If common stocks are issued, then the journal entry should be:
Dr Cash 3,000,000
Cr Common stock 3,000,000
