Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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.
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 nventory can be sold for only $33,000. The following is a trial balance as of March 14, 2020, the day the company files for a Chapter 7 Iquidation: Debit Credit Accounts payable 33,090 Accounts receivable $ 25,090 Accumulated depreciation, building 50, 908 Accumulated depreciation, equipment 16, 908 Additional paid-in capital 8, 090 Advertising payable 4,908 Building 80, 989 Cash 1,989 Common stock 59, 090 Equipment 30,980 Inventory Investments 15,089 Land Note payable-Colorado Savings and Loan (secured by lien on land and building) 79,908 Note payable-First National Bank (secured by equipment) 150, 908 Payroll taxes payable 1, 090 Retained earnings (deficit) 126,989 Salaries payable (owed equally to two employees) 5,080 Totals $387, 080 $ 387,090 Company officials believe that 60 percent of the accounts receivable can be collected if the company is liquidated. The building and and 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.Prepare a statement of financial affairs for Lynch, Inc., as of March 14, 2020. LYNCH, INC. Statement of Financial Affairs March 14, 2020 Available for Book Values Assets Unsecured Creditors Pledged with Fully Secured Creditors: Pledged with Partially Secured Creditors: Free Assets: Total available to pay liabilities with priority and unsecured creditors Available for unsecured creditors Estimated deficiency 0 Unsecured Book Values Liabilities and Stockholders' Equity NonpriorityUnsecured Book Values Liabilities and Stockholders' Equity Nonpriority Liabilities Liabilities with Priority: Total Fully Secured Creditors: Partially Secured Creditors: Unsecured Creditors: Stockholders' equity
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started