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. For each of the following transactions, identify the real and/or financial assets that trade hands. Are any financial assets created or destroyed in the transaction?

a. Lanni takes out a bank loan. It receives $50,000 in cash and signs anote promising to pay back the loan over three years.
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software.
c. 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 5,000 shares of Microsoft stock.
d. Lanni sells the shares of stock for $25 per share and uses part of the proceeds to pay off the bank loan.

Answer 1

Answer:

a) there is a financial asset created which is the loan Lanny take

b) the sofware is a real asset there is no financial asset created nor destroyed

c) the financial assets created here are the 5,000 shares of Microsoft

d) the shares are not destroyed as they are givien to the new stockholders

however the financial asset for the bank (the loan) is destroyed when Lanni pays to settle the debt.

Explanation:

A financial asset is created in financing operation when one side creates either a debt security (note payable or bonds) or a equity security (shares)

Answer 2

Answer:

Explanation:

A financial asset

B financial asset (money) to create real asset ( software product)

C Real asset ( software products) to create financial asset( shares)

D. Lanni converting his shares to cash to pay back the loan is a financial asset.