Chap001 - and the financial statements include this...

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Accounting—Present and Past SOLUTIONS: E1-5. The principal factors Marsha Thompson must consider are her competence and independence. Is she competent to prepare financial statements for a company that operates in a different industry than the one in which she works? A contingent fee arrangement would normally be considered an impairment of her independence because she would directly benefit if the loan were to be approved. E1-6. Suggested discussion strategy: Q: Why does a business have value ? A: It provides the owners an opportunity to earn a profit, an opportunity for personal fulfillment from being in charge, and an opportunity to provide a product or service that is useful to others. Q: How can this value be measured? A: Financial information will have most to do with evaluating the firm’s profitability,
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Unformatted text preview: and the financial statements include this information. Q: How is an asking price for the sale of a business established? A: The asking price should be a function of the profit, resources, and obligations related to the business, as shown on the financial statements. Note : This exercise also provides an opportunity to point out some of the basic limitations of the data provided by the accounting process (e.g., historical cost information how useful are past earnings results in predicting future earnings and cash flows?). Be careful not to get too carried away with details. Let the students lead this discussion. E1-7. Answers will vary depending on the browsers used by students to locate the requested information....
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This note was uploaded on 04/04/2009 for the course ACC ACC/539 taught by Professor Michaeldonohoe during the Fall '05 term at University of Phoenix.

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