Injection Plastics Company has been operating for three years. At December 31, 2010, the accounting records reflected the following:

During the year 2011, the company had the following summarized activities:
a. Lent $7,000 to a supplier who signed a two-year note.
b. Purchased equipment that cost $18,000; paid $6,000 cash and signed a one-year note for the balance.
c. Issued an additional 2,000 shares of capital stock for $12,000 cash.
d. Borrowed $12,000 cash from a local bank, payable in three months.
e. Purchased short-term investments for $9,000 cash.
f. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance.
g. Purchased a patent (an intangible asset) for $3,000 cash.
h. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.
i. Built an addition to the factory for $25,000; paid $9,000 in cash and signed a three-year note for the balance.

Required:
1. Create T-accounts for each of the accounts on the balance sheet and enter the balances at the end of 2010 as beginning balances for 2011.
2. Record each of the events for 2011 in T-accounts (including referencing) and determine the ending balances.
3. Explain your response to event (f).
4. Prepare a classified balance sheet at December 31, 2011.
5. Compute the financial leverage ratio for 2011. What does this suggest about InjectionPlastics?

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Cash Investments (short-term) $21,000 Intangibles $ 3,000 15,000 2.000 Accounts payable Accounts receivable 3,000 Accrued liabilities payable 2,000 24,000 Notes payable (short-term) 7,000 Notes receivable (long-term 1.000 Long-term notes payable 48,000 Inventory Equipment Factory building 48,000 Contributed capital 90,000 Retained earnings 90,000 30,000