L03, L05 1. 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 $33,000. Following is a trial balance as of March 14, 2013, the day the company files for a Chapter 7 liquidation: Debit Credit Accounts payable 35 33,000 Accomits receivable $ 25,000 Accumulated depreciation, building 50,000 Accumulated depreciation, equipment 16,000 Additional paid-in capital 8,000 Advertising payable 4,000 Building 80,000 Cash 1,000 Common stock 50,000 Equipment 30,000 Inventory 100,000 Investments 15,000 Land 10,000 Note PayableColorado Savings and Loan (secured by lien on land 70,000 and building) Note PayableFirst National Bank (secured by equipment) 150,000 Payroll taxes payable 1,000 Retained earnings (decit) 126,000 Salaries payable (owed equally to two employees) 5,000 Totals $387,00$387,000 0 2. 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 $75,000, and the equipment is worth $19,000. The investments represent shares of a nationally traded company that can be sold at the current time for $21,000. Administrative expenses necessary to carry out a liquidation would approximate $16,000. 3. Prepare a statement of nancial affairs for Lynch, Inc., as of March 14, 2013. L03, L06