Lanni Products is a start-up computer software development firm. It currently ow

Question

Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $19,000 and has cash on hand of $30,000 contributed by Lanni's owners. Lanni takes out a bank loan. It receives $30,000 in cash and signs a note promising to pay back the loan over 3 years.

1 Prepare the balance sheet just after it gets the bank loan. What is the ratio of real assets to total assets?

2 Prepare the balance sheet after Lanni spends the $60,000 to develop its software product. What is the ratio of real assets to total assets?

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 1,850 shares for $35 per share. Prepare the balance sheet after Lanni accepts the payment of shares from Microsoft. What is the ratio of real assets to total assets?

Explanation / Answer

  

1.

Ratio of real assets to total assets=19,000:79,000=0.24

2.

Ratio of real assets to total assets=(19,000+60,000):79,000=1

3.

Ratio of real assets to total assets=19,000:83,750=0.23

Assets Amount($) Liabilities Amount($) Cash 60,000 Bank Loan 30,000 Computer Equipment 19,000 Shareholder's Equity 49,000 Total 79,000 Total 79,000

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