Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $31,000 and has cash on hand of $18,000 contributed by Lanni’s owners. For each of the following transactions, identify the real and/or financial assets that trade hands. Choose one option for following blank: A. real asset. B. financial asset. C. real liability. D. Finanical liability.  1. Lanni takes out a bank loan. It receives $48,000 in cash and signs a note promising to pay back the loan over 3 years. The bank loan is a (select an option) for Lanni, and a (select an option) for the bank. The cash Lanni receives is a (select an option). 2. Lanni uses the cash from the bank plus $18,000 of its own funds to finance the development of new financial planning software. Lanni transfers  (select an option) (cash) to the software developers. In return, Lanni receives the completed software package, which is a (select an option).  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 1,400 shares of Microsoft stock. Lanni exchanges the (select an option) (the software) for a (select an option), which is 1,400 shares of Microsoft stock. If Microsoft issues new shares in order to pay Lanni, then this would represent the creation of new   (select an option).

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
100%

Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $31,000 and has cash on hand of $18,000 contributed by Lanni’s owners.

For each of the following transactions, identify the real and/or financial assets that trade hands. Choose one option for following blank: A. real asset. B. financial asset. C. real liability. D. Finanical liability. 

1. Lanni takes out a bank loan. It receives $48,000 in cash and signs a note promising to pay back the loan over 3 years.

The bank loan is a (select an option) for Lanni, and a (select an option) for the bank. The cash Lanni receives is a (select an option).

2. Lanni uses the cash from the bank plus $18,000 of its own funds to finance the development of new financial planning software.

Lanni transfers  (select an option) (cash) to the software developers. In return, Lanni receives the completed software package, which is a (select an option). 

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 1,400 shares of Microsoft stock.

Lanni exchanges the (select an option) (the software) for a (select an option), which is 1,400 shares of Microsoft stock. If Microsoft issues new shares in order to pay Lanni, then this would represent the creation of new   (select an option). 

4. Lanni sells the shares of stock for $40 per share and uses part of the proceeds to pay off the bank loan.

By selling its shares in Microsoft, Lanni exchanges one (select an option)  (1,400 shares of stock) for another ($56,000 in cash). Lanni uses the (select an option) of $48,000 in cash to repay the bank and retire its promissory note. The bank must return its (select an option) to Lanni. 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Double entry bookkeeping system
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education