ACC 208A Question #1

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 $540,000 long-term loan from Gulfport State Bank, $120,000 of which will be used to bolster the Cash account and $420,000 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: 86,000 190,000 Cash Marketable securities 22.000 529,000 Accounts receivable, net 340.000 Inventory 960,000 635.000 Prepaid expenses 22.000 26.000 Total current assets 1,597,000 1,213,000 Plant and equipment, net 1,631,600 1,410,000 Total assets $3,228,600 2,623,000 Liabilities and Stockholders Equity Liabilities: 820,000 470,000 Current liabilities Bonds payable, 12% 800,000 800,000 1.620,000 1.270,000 Total liabilities Stockholders' equity Common stock, $20 par 730.000 730.000 878,600 Retained earnings 623.000 Total stockholders' equity 1,608,600 1,353,000 $3,228,600 2,623,000 Total liabilities and equity