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< te sets rovides mally cial 6:20 Mir The Mixed Attribute Measurement Model Consider the fundamental accounting identity: Assets Liabilities + Shareholders' Equity When a
< te sets rovides mally cial 6:20 Mir The Mixed Attribute Measurement Model Consider the fundamental accounting identity: Assets Liabilities + Shareholders' Equity When a firm is formed and receives financing (through equity investments of shareholders and perhaps debt financing from banks), the balance sheet is simple, and the valuation of the assets and liabilities is straightforward. For example, suppose an entrepreneur starts a consulting com- pany by borrowing $1 million from a bank. Initially, the value of the assets would be $1 million in cash and equal to a liability to repay the bank loan in the same amount. However, valuing the company's assets, liabilities, and equity becomes less clear (but more interesting) as the company begins deploying that cash and operating activities commence. The following are a number of challenging examples that might arise, which you will learn to analyze throughout this chapter and the remainder of this text: 1. The entrepreneur purchases an automobile for use in the b
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