Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on...

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Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents. Although the company has been fairly profitable, It Is now experiencing 22 a severe cash shortage. For this reason, It is requesting a $610,000 long-term loan from Gulfport State Bank, $155,000 of which will be used to bolster the Cash account and $455,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net %24 114,000 620,000 1,055,000 30,000 1,819,000 1,977,800 $ 3,796,800 260,000 29,000 410,000 705,000 33,000 1,437,000 1,480,000 $ 2,917,000 Total assets Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% Total liabil1ities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 855,000 800,000 1,655,000 418, 000 800, 000 1,210,000 800,000 1,341, 800 2,141,800 $ 3,796,800 800,000 987,000 1,707,000 $ 2,917,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year $ 5,550,000 3,985,000 1,565,000 675,000 890,000 96,000 794,000 238, 200 555,800 121,000 434, 800 907,000 Last Year $ 4,680,000 3,560,000 1,120,000 570,e00 550, 000 96,000 454,000 136, 200 317,800 100,000 217,800 689, 200 907,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net intome before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings $ 1,341,800 During the past year, the company introduced several new product lines and ralsed the selling prices on a number of old product lines in order to Improve its profit margin. The company also hired a new sales manager, who has expanded sales Into several new territories. Sales terms are 3/10, n/30. All sales are on account. Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash % Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets 0.0 0.0 Plant and equipment, net Total assets 0.0 % 0.0 % Liabilities and Stockholders' Equity Liabilities: Current liabilities % % Bonds payable, 12% Total liabilities 0.0 0.0 Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity 0.0 0.0 Total liabilities and equity 0.0 % 0.0 % < Req 1 Req 2B > Sabin Electronics Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxes Net income 0.0 % 0.0 % < Req 2A Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents. Although the company has been fairly profitable, It Is now experiencing 22 a severe cash shortage. For this reason, It is requesting a $610,000 long-term loan from Gulfport State Bank, $155,000 of which will be used to bolster the Cash account and $455,000 of which will be used to modernize equipment. The company's financial statements for the two most recent years follow Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net %24 114,000 620,000 1,055,000 30,000 1,819,000 1,977,800 $ 3,796,800 260,000 29,000 410,000 705,000 33,000 1,437,000 1,480,000 $ 2,917,000 Total assets Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% Total liabil1ities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 855,000 800,000 1,655,000 418, 000 800, 000 1,210,000 800,000 1,341, 800 2,141,800 $ 3,796,800 800,000 987,000 1,707,000 $ 2,917,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year $ 5,550,000 3,985,000 1,565,000 675,000 890,000 96,000 794,000 238, 200 555,800 121,000 434, 800 907,000 Last Year $ 4,680,000 3,560,000 1,120,000 570,e00 550, 000 96,000 454,000 136, 200 317,800 100,000 217,800 689, 200 907,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net intome before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings $ 1,341,800 During the past year, the company introduced several new product lines and ralsed the selling prices on a number of old product lines in order to Improve its profit margin. The company also hired a new sales manager, who has expanded sales Into several new territories. Sales terms are 3/10, n/30. All sales are on account. Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash % Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets 0.0 0.0 Plant and equipment, net Total assets 0.0 % 0.0 % Liabilities and Stockholders' Equity Liabilities: Current liabilities % % Bonds payable, 12% Total liabilities 0.0 0.0 Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity 0.0 0.0 Total liabilities and equity 0.0 % 0.0 % < Req 1 Req 2B > Sabin Electronics Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold Gross margin 0.0 0.0 Selling and administrative expenses Net operating income 0.0 0.0 Interest expense Net income before taxes 0.0 0.0 Income taxes Net income 0.0 % 0.0 % < Req 2A

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