Injection Plastics Company has been operating for three

years A
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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Injection Plastics Company has been operating for three years A
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