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 $510,000 long-term loan from Gulfport State Bank, $105,000 of which will be used to bolster the Cash account and $405,000 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: $ 74,000 $160,000 0 19,000 Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses 490,000 310,000 955,000 605,000 23,000 23,000 1,542,000 1,117,000 1,376,400 1,300,00 Total current assets Plant and equipment, net Total assets $2,918,400 s2,417,000 Liabilities and Stockholders Equity Liabilities: $ 750,000 $440,000 Current liabilities Bonds payable, 12% 650,000 650,000 Total liabilities ,400,000 ,090,000o Stockholders' equity: Common stock, $15 par Retained earnings 720,000 720,000 798,400 607,000 Total stockholders'equity 1,518,400 1,327,000 Total liabilities and equity $2,918,400 s2.417.000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year $5,050,000 4,380,000 3,885,000 3,460,000 1,165,000 920,000 Sales Cost of goods sold Gross margin Selling and administrative expenses 655,000 550,000 Net operating income 510,000 370,000 Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 78,000 78,000 432,000 292,000 129,600 87,600 302,400 204,400 111,000 90,000 191,400 114,400 607,000 492,600 $ 798,400 $607,000 During the past year, the company introduced several new product lines and raised 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