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Which of the following statements are true? (Select all that apply.)

-Assets are amounts owed to other entities
-Liabilities are amounts owed to other entities
-Liabilities are claims against the firm by its creditors
-Liabilities are present obligations to transfer assets or provide services to other organizations
-Stockholders' equity is the amount owed to other entities.

1 Answer

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Final answer:

Liabilities are amounts owed to other entities and are present obligations to transfer assets or provide services, while assets are not amounts owed to others but are valuable resources owned by the firm. Stockholders' equity is not an amount owed to other entities; it is the residual interest in the assets after liabilities.

Step-by-step explanation:

When looking at a firm's financial statements, accuracy in understanding the categorization of assets, liabilities, and stockholders' equity is critical. Liabilities are amounts owed to other entities and represent claims against the firm by its creditors. They are also present obligations of the firm to transfer assets or provide services to other organizations.

On the other hand, assets are resources owned by a firm and include things like cash, inventory, property, and receivables. Assets are not amounts owed to other entities; rather, they provide economic benefit to the firm. Lastly, stockholders' equity is not an amount owed to other entities; it represents the owners' claim on the assets after all liabilities have been paid off. This is often referred to as the residual interest in the assets of the entity.

In conclusion, among the statements provided, only the items referring to liabilities are true. Liabilities are amounts owed to other entities, are claims against the firm by creditors, and are present obligations involving the potential transfer of assets or services.

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