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 3 years.

Required:
a. Prepare the balance sheet just after it gets the bank loan.
b. What is the ratio of real assets to total assets?
c. Prepare the balance sheet after Lanni spends the $70,000 to develop its software product.

Answer 1

a. Liabilities Assets

Bank loan $50,000 Cash $70,000

Shareholders' equity $50,000 Computers $30,000

Total= $100,000 $100,000

b. Real assets= $30,000, Total assets= $100,000

Ratio of real assets to total assets = $30,000 / $100,000

Ratio of real assets to total assets = 0.3

Ratio of real assets to total assets =30%

c. After Lanni spends the $70,000 to develop its software product.

Liabilities Assets

Bank loan $50,000 Software product $70,000

Shareholders' equity $50,000 Computers $30,000

Total= $100,000 $100,000