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: Last Year Sabin Electronics Comparative Balance Sheet This Year Assets Current assets: Cash $ 86,000 Marketable securities 0 Accounts receivable, net 529.000 Inventory 960,000 Prepaid expenses 22,000 $190,000 22,000 340.000 635.000 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: Current liabilities Bonds payable, 12% $ 820,000 800,000 $470,000 800,000 Total liabilities 1,620,000 1,270,000 Stockholders' equity: Common stock, $20 par Retained earnings 730,000 878,600 730,000 623,000 Total stockholders' equity 1,608,600 1,353,000 Total liabilities and equity $3,228,600 $2,623,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $5,200,000 3,915,000 $4,470,000 3,490,000 Cost of goods sold Gross margin Selling and administrative expenses 1,285,000 661,000 980,000 556,000 Net operating income Interest expense 624,000 96,000 424,000 96,000 Net income before taxes Income taxes (30%) 528,000 158,400 328,000 98,400 Net income Common dividends 369,600 114,000 229,600 93,000 Net Income retained Beginning retained earnings 255,600 136,600 623,000 486,400 $ 878,600 $623,000 Ending retained earnings