Paul Sabin organized Sabin Electronics 10 years ago to produce and sel 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 $670,000 long-term loan from Gulfport State Bank, $185,000 of which will be used to bolster the Cash account and $485,000 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 S 133,000 $320,000 14,000 0 698,000 470,000 1,115,000 765,000 34,000 39,000 1,608,000 Total current assets 1,980,000 Plant and equipment, net 2,015,600 1,380,000 Total assets $3,995,600 $2,988,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% $ 885,000 $470,000 750,000 750,000 Total liabilities 1,635,000 1,220,000 Stockholders' equity: Common stock, $20 par Retained earnings 860,000 860,000 1,500,600 908,000 1,768,000 Total stockholders' equity 2,360,600 Total liabilities and equity $3,995,600 s2,988,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year $5,850,000 $4,860,000 3,620,000 Sales Cost of goods sold 4,045,000 Gross margin Selling and administrative expenses Net operating income 1,805,000 1,240,000 687,000 582,000 1,118,000 658,000 90,000 90,000 Interest expense Net income before taxes Income taxes (30%) 1,028,000 568,000 308,400 170,400 719,600 397,600 127,000 106,000 Net income Common dividends Net income retained Beginning retained earnings 592,600 291,600 908,000 616,400