Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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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. 

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