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 $530,000 long-term loan from Gulfport State Bank, $115,000 of which will be used to bolster the Cash account and $415,000 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 $ 82,000 180,000 21,000 330,000 625,000 25,000 516,000 980,000 22,000 Total current assets Plant and equipment, net 1,600,000 1,570,200 1,181,000 1,400,000 Total assets $3,170,200 2,581,000 Liabilities and Stockholders Equity Liabilities: Current liabilities Bonds payable, 12% $815,000 460,000 750,000 750,000 Total liabilities 1,565,000 1,210,000 Stockholders' equity: Common stock, $15 par Retained eamings 720,000 885,200 720,000 651,000 1,371,000 $3,170,200 2,581,000 Total stockholders' equity 1,605,200 Total liabilities and equity Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold $5,150,000 4,440,000 3,480,000 3,905,000 Gross margin Selling and administrative expenses 1,245,000 659,000 960,000 554,000 Net operating income 586,000 90,000 406,000 90,000 Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings 496,000 148,800 316,000 94,800 347,200 113,000 221,200 92,000 234,200 651,000 129,200 521,800 $ 885,200 651,000