These teaching notes present solutions to the Arborista, Inc. case. These solutions are ordered and labeled (i.e., A through G) to correspond to Figure 1 in the “Implementation Guidance” section of the Case. Teaching suggestions are incorporated in the solutions.
Although most instructors have their own methods of introducing the financial reporting structure, a discussion of the ideas of stocks and flows (from economics), wealth and income (from economics), and/or position and movement (from physics) can be helpful in setting up the ideas of the balance sheet and the statements that explain the changes in the balance sheet (i.e., the income statement and the cash flow statement). The key ideas that must be put on the table are the standard ones: the balance sheet is ongoing and accumulates, while the changes in the balance sheet occur during a period of time. Once the basic structure is discussed, the class should...
