Question

Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni's owners.

1. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years.
2. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software.
3. Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 2,000 shares of Microsoft stock.
4. Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay off the bank loan.
   

a-1. Prepare its balance sheet just after it gets the bank loan.

a-2. What is the ratio of real assets to total assets? (Round your answer to 1 decimal place.)

b-1. Prepare the balance sheet after Lanni spends the $70,000 to develop its software product, with the software valued at cost.

b-2. What is the ratio of real assets to total assets? (Round your answer to 1 decimal place.)

c-1. Prepare the balance sheet after Lanni accepts the payment of shares from Microsoft.

c-2. What is the ratio of real assets to total assets? (Round your answer to 2 decimal places.)

Answer 1

A-1)

Assest	Amount	Liabilities & Equity	Amount
Cash	$70,000	Bank Loan	$50,000
Equipment	$30,000	Equity	$50,000
Total	$100,000	Total	$100,000

A-2) Real Assest/Total Assest = $30,000/$100,000 = 0.30

B-1)

Assest	Amount	Liabilities & Equity	Amount
Software product	$70,000	Bank Loan	$50,000
Computers	$30,000	Equity	$50,000
Total	$100,000	Total	$100,000

B-2) Real Assest/Total Assest = $100,000/$100,000 = 1.00

C-1)

Assest	Amount	Liabilities & Equity	Amount
Micro soft shares (2000*$70)	$140,000	Bank Loan	$50,000
Computers	$30,000	Equity	$120,000
Total	$170,000	Total	$170,000

C-2) Real Assest/Total Assest = $30,000/$170,000 = 0.18