Lee Delivery Company. Inc.. was organized in 2003. The following transactions occurred during >ear 2003:

a. Received $40,000 cash from organizers in exchange for stock in the new company.

b. Purchased land for SI 2.000. signing a one-year note (ignore interest).

c. Bought two used delivery trucks for operating purposes at the start ot the \ ear at a cost of

$10,000 each: paid $2,000 cash and signed a note due in three years for the rest (ignore interest^.

d. Sold one-fourth of the land for $3,000 to Birkins Moving, which signed a six-month note.

e. Paid $2,000 cash to a truck repair shop for a new motor for one of the trucks. (Hint: Increase the account you used to record the purchase of the trucks since the productive life of the truck has been improved.)
/. Traded the other truck and $6,000 cash for a new one.
g. Stockholder Jonah Lee paid $22,000 cash for a vacant lot (land) for his personal use.
Required:
Set up appropriate T-accounts with beginning balances of $0 for Cash, Short-Term Note Receivable, Land, Equipment, Short-Term Notes Payable, Long-Term Notes Payable, and Contributed Capital. Using the T-accounts, record the effects of these transactions by Lee Delivery Company.
Prepare a classified balance sheet for Lee Delivery Company at the end of 2003.
At the end of the next two years, Lee Delivery Company reported the following amounts on its balance sheets:

Compute the company's financial leverage ratio for 2004 and 2005. What is the trend and what does this suggest about the company? 4. At the beginning of year 2006, Lee Delivery Company applied to your bank for a $100,000 loan to expand the business. The vice president of the bank asked you to review the information and make a recommendation on lending the funds. What recommendation would you make to the bank's vice president about lending the money to Lee Delivery Company?

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End of 2004 Assets Liabilities $90,000 40,000 End of 2005 $120,000 70,000 Stockholders' Equity 50,000 50,000