Question

Browning Inc. is a small start-up software development firm. It currently owns computer equipment worth $30,000; has cash on hand of $75,000 contributed by Browning’s owners. For the transaction below, identify the real and/or financial assets that trade hands.

Browning sells the $1,000 shares of FaceBook stock at $210/share and uses part of the proceeds to pay off the bank loan.

Answer 1

Browning Inc sells $1,000 shares of Facebook at $210 /Share. In this case Browning destroyed financial asset and uses part of the proceeds to pay off the bank loan.

Here, financial assets are destroyed such as bank loan in exchange of another financial asset that is stock, And once loan is repaid, it will create the financial asset (Loan interest payments saved due to no loan left).

Therefore, It is a financial asset.

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