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 $620,000 long-term loan from Gulfport State Bank, $160,000 of which will be used to bolster the Cash account and $460,000 of which will be used to modemize 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: $ 118,000 270,000 30,000 420,000 715,000 34,000 Marketable securities Accounts receivable, net 633,000 1,065,000 30,000 Inventory Prepaid expenses 1,846,000 1,969,200 1,469,000 1,490,000 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders Equity $3,815,200 2,959,000 Liabilities Current liabilities Bonds payable, 12% $ 820,000 850,000 420,000 850,000 Total liabilities 1,670,000 1,270,000 Stockholders' equity Common stock, $15 par Retained earnings 630,000 1,515,200 630,000 1,059,000 1,689,000 $3,815,200 2,959,000 Total stockholders' equity 2,145,200 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold $5,600,000 $4,710,000 3,570,000 3,995,000 Gross margin 1,605,000 677,000 1,140,000 572,000 Selling and administrative expenses Net operating income 928,000 102,000 568,000 102,000 Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 826,000 247,800 466,000 139,800 578,200 122,000 326,200 101,000 456,200 1,059,000 225,200 833,800 $1,515,200 1,059,000