inventory can be sold for only $33,800. The following is a trial balance as of March 14, 2020, the day the company files for a Chapter 7 liquidation: Accounts payable. Accounts receivable Accumulated depreciation, building Accumulated depreciation, equipment Additional paid-in capital Advertising payable Building Cash Common stock Equipment Inventory Investments Land Note Payable Colorado Savings and Loan (secured by lien on land and building) Note Payable-First National Bank (secured by equipment) Payroll taxes payable Retained earnings (deficit) Salaries payable (owed equally to two employees) Totals Debit $ 25,000 81,800 1,070 32,300 113,000 17,000 12,000 146,000 $428,170 $ Credit 33,800 50,500 16,200 8,290 4,020 51,900 71,500 185,870 1,050 5,040 $ 428,170 Company officials believe that 60 percent of the accounts receivable can be collected if the company is liquidated. The building and land have a fair value of $76,700, and the equipment is worth $20,800. The investments represent shares of a nationally traded company that can be sold at the current time for $22,100. Administrative expenses necessary to carry out a liquidation would approximate $18,000.
inventory can be sold for only $33,800. The following is a trial balance as of March 14, 2020, the day the company files for a Chapter 7 liquidation: Accounts payable. Accounts receivable Accumulated depreciation, building Accumulated depreciation, equipment Additional paid-in capital Advertising payable Building Cash Common stock Equipment Inventory Investments Land Note Payable Colorado Savings and Loan (secured by lien on land and building) Note Payable-First National Bank (secured by equipment) Payroll taxes payable Retained earnings (deficit) Salaries payable (owed equally to two employees) Totals Debit $ 25,000 81,800 1,070 32,300 113,000 17,000 12,000 146,000 $428,170 $ Credit 33,800 50,500 16,200 8,290 4,020 51,900 71,500 185,870 1,050 5,040 $ 428,170 Company officials believe that 60 percent of the accounts receivable can be collected if the company is liquidated. The building and land have a fair value of $76,700, and the equipment is worth $20,800. The investments represent shares of a nationally traded company that can be sold at the current time for $22,100. Administrative expenses necessary to carry out a liquidation would approximate $18,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Prepare a statement of financial affairs for Lynch, Inc., as of March 14, 2020.
Book Values
$
0
$
Pledged with Fully Secured Creditors:
Free Assets:
Pledged with Partially Secured Creditors:
LYNCH, INC.
Statement of Financial Affairs
March 14, 2020
> Show Transcribed Text
Assets.
Total available to pay liabilities with priority and
unsecured creditors
Book Values
Available for unsecured creditors
Estimated deficiency
0
Liabilities and Stockholders' Equity
Liabilities with Priority:
Total
Fully Secured Creditors:
Partially Secured Creditors:
Unsecured Creditors:
< Prev
Stockholders' equity
Available for
Unsecured
Creditors
$
$
$
$
0
$
0
0
0
18 of 20
⠀
Unsecured
Nonpriority
Liabilities
$
Next >
$
0
0
Transcribed Image Text:Lynch, Inc., is a hardware store operating in Boulder, Colorado. Management recently made some poor inventory acquisitions that
have loaded the store with unsalable merchandise. Because of the drop in revenues, the company is now insolvent. The entire
inventory can be sold for only $33,800. The following is a trial balance as of March 14, 2020, the day the company files for a Chapter 7
liquidation:
Accounts payable
Accounts receivable
Accumulated depreciation, building
Accumulated depreciation, equipment
Additional paid-in capital
Advertising payable.
Building
Cash
Common stock
Equipment
Inventory
Investments
Land
Note Payable Colorado Savings and Loan (secured by lien on land
and building)
Note Payable-First National Bank (secured by equipment)
Payroll taxes payable
Retained earnings (deficit)
Salaries payable (owed equally to two employees)
Totals
Debit
$ 25,000
81,800
1,070
32,300
113,000
17,000
12,000
146,000
$428,170
$
Credit
33,800
50,500
16,200
8,290
4,020
51,900
71,500
185,870
1,050
5,040
$ 428,170
Company officials believe that 60 percent of the accounts receivable can be collected if the company is liquidated. The building and
land have a fair value of $76,700, and the equipment is worth $20,800. The investments represent shares of a nationally traded
company that can be sold at the current time for $22,100. Administrative expenses necessary to carry out a liquidation would
approximate $18,000.
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