value 10.00 points 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 a severe cash shortage. For this reason, it is requesting a $650,000 long-term loan from Gulfport State Bank, $175,000 of which will be used to bolster the Cash account and $475,000 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 $ 130,000 $300,000 12,000 450,000 745,000 37,000 672,000 1,095,000 34,000 1,931,000 2,099,400 1,544,000 1,520,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders Equity $4,030,400 $3,064,000 Liabilities Current liabilities Bonds payable, 12% $ 875,000 $450,000 750,000 750,000 Total liabilities 1,625,000 1,200,000 Stockholders' equity 720,000 1,685,400 720,000 Common stock, $15 par Retained earnings 1,144,000 1,864,000 $4,030,400 $3,064,000 Total stockholders' equity 2,405,400 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold $5,750,000 $4,800,000 3,600,000 4,025,000 Gross margin Selling and administrative expenses 1,725,000 683,000 1,200,000 578,000 Net operating income Interest expense 1,042,000 90,000 622,000 90,000 Net income before taxes Income taxes (30%) 952,000 285,600 532,000 159,600