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. • 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. • Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software. • 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. • Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay off the bank loan.

Answer 1

c-1. Assets Microsoft shares=2000*70 computers Total Liabilities & Shareholder equity 140000 Bank loan 30000 Shareholder equity=50000+(140000-70000) 170000 Total 50000 120000 170000 c-2. 0.18 Ratio of real assets to total assets 30000/170000