Table of contents

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1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

When a company exchanges one asset for another asset of equal value, what is the effect on owner's equity according to the fundamental accounting equation?

Owner's equity is eliminated.

Owner's equity increases.

Owner's equity remains unchanged.

Owner's equity decreases.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation must always remain balanced.

Recognize that exchanging one asset for another asset of equal value does not affect the total value of assets. The company is simply replacing one asset with another of the same worth.

Since the total value of assets remains unchanged, there is no impact on liabilities or owner's equity. Both sides of the equation remain balanced.

Owner's equity represents the residual interest in the assets of the company after deducting liabilities. If assets and liabilities are unaffected, owner's equity remains unchanged.

Conclude that the exchange of assets of equal value has no effect on owner's equity, as it does not alter the overall financial position of the company.