BUS 321 CHAPTER 1 QUESTIONS WITH VERIFIED
ANSWERS
a. Toyota takes out a bank loan to finance the construction of a new factory.
Toyata _____________ a _________ asset--factory. The loan is a _____________
asset that is __________ in the transaction. - Answers - creates; real
financial; created
b. Toyota pays off its loan.
When the loan is repaid, the ____________ asset is ____________ but the
__________ asset continues to exist. - Answers - financial; destroyed; real
c. Toyota uses $10 million of cash on hand to purchase additional inventory of spare
auto parts.
The cash is a ____________ asset that is traded in exchange for a _________ asset,
inventory. - Answers - financial; real
Suppose that in a wave of pessimism, housing prices fall by 10% across the entire
economy.
a. Has the stock of real assets of the economy changed? - Answers - No
Suppose that in a wave of pessimism, housing prices fall by 10% across the entire
economy.
b. Are individuals less wealthy? - Answers - Yes
a. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising
to pay back the loan over three years
The bank loan is a ________________ for Lanni. Lanni's $50,000 IOU is the banks
_________________. The cash Lanni receives is a ___________________. The new
financial asset _____________ is Lanni's promissory note held by the bank. - Answers -
financial liability
financial asset
financial asset
created
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the
development of new financial planning software
, The cash paid by Lanni is the transfer of a _______________ to the software
developer. In return, Lanni gets a ________________, the completed software. -
Answers - financial asset
real asset
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 2,000 shares of Microsoft
stock.
Lanni sells the software, which is a _____________, to Microsoft. In exchange Lanni
receives a ___________________, 2,000 shares of Microsoft stock. A new financial
asset is ______________ if Microsoft issues new shares. - Answers - real asset
financial asset
created
d. Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay
off the bank loan.
In selling 2,000 shares of stock for $140,000, Lanni is exchanging one
___________________ for another. In paying off the IOU with $50,000, Lanni is
exchanging __________________. The loan is _______________ in the transaction,
since it is retired when paid. - Answers - financial asset
financial assets
destroyed
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 three years.
- Lanni uses the cash from the bank plus $20,000 of its own funds to finance the
development of new financial planning software.
- 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 2,000 shares of Microsoft
stock.
- Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay
off the bank loan.
a-1. Prepare its balance sheet just after it gets the bank loan. - Answers - Assets:
Cash 70,000
Computers 30,000
Total 100,000
Liabilities & Shareholders' Equity
ANSWERS
a. Toyota takes out a bank loan to finance the construction of a new factory.
Toyata _____________ a _________ asset--factory. The loan is a _____________
asset that is __________ in the transaction. - Answers - creates; real
financial; created
b. Toyota pays off its loan.
When the loan is repaid, the ____________ asset is ____________ but the
__________ asset continues to exist. - Answers - financial; destroyed; real
c. Toyota uses $10 million of cash on hand to purchase additional inventory of spare
auto parts.
The cash is a ____________ asset that is traded in exchange for a _________ asset,
inventory. - Answers - financial; real
Suppose that in a wave of pessimism, housing prices fall by 10% across the entire
economy.
a. Has the stock of real assets of the economy changed? - Answers - No
Suppose that in a wave of pessimism, housing prices fall by 10% across the entire
economy.
b. Are individuals less wealthy? - Answers - Yes
a. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising
to pay back the loan over three years
The bank loan is a ________________ for Lanni. Lanni's $50,000 IOU is the banks
_________________. The cash Lanni receives is a ___________________. The new
financial asset _____________ is Lanni's promissory note held by the bank. - Answers -
financial liability
financial asset
financial asset
created
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the
development of new financial planning software
, The cash paid by Lanni is the transfer of a _______________ to the software
developer. In return, Lanni gets a ________________, the completed software. -
Answers - financial asset
real asset
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 2,000 shares of Microsoft
stock.
Lanni sells the software, which is a _____________, to Microsoft. In exchange Lanni
receives a ___________________, 2,000 shares of Microsoft stock. A new financial
asset is ______________ if Microsoft issues new shares. - Answers - real asset
financial asset
created
d. Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay
off the bank loan.
In selling 2,000 shares of stock for $140,000, Lanni is exchanging one
___________________ for another. In paying off the IOU with $50,000, Lanni is
exchanging __________________. The loan is _______________ in the transaction,
since it is retired when paid. - Answers - financial asset
financial assets
destroyed
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 three years.
- Lanni uses the cash from the bank plus $20,000 of its own funds to finance the
development of new financial planning software.
- 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 2,000 shares of Microsoft
stock.
- Lanni sells the shares of stock for $70 per share and uses part of the proceeds to pay
off the bank loan.
a-1. Prepare its balance sheet just after it gets the bank loan. - Answers - Assets:
Cash 70,000
Computers 30,000
Total 100,000
Liabilities & Shareholders' Equity
