Free block diagram of balloon and block shown below :
When the balloon is held stationary in air, the forces acting on it get balance
Up thrust = Wt. of Balloon + Tension in string
U = Mg + T
M for the small block of mass M/2 floating stationary in air
When the string is cut T = 0, the small block begins to fall freely, the balloon rises up with an acceleration ‘a’ such that
U – Mg = Ma