Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several
ID: 2486112 • Letter: P
Question
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:
Explanation / Answer
Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 110,000 $ 250,000 Marketable securities 0 28,000 Accounts receivable, net 607,000 400,000 Inventory 1,045,000 695,000 Prepaid expenses 30,000 32,000 Total current assets 1,792,000 1,405,000 Plant and equipment, net 1,946,400 1,470,000 Total assets $ 3,738,400 $ 2,875,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 850,000 $ 400,000 Bonds payable, 12% 750,000 750,000 Total liabilities 1,600,000 1,150,000 Stockholders' equity: Common stock, $15 par 790,000 790,000 Retained earnings 1,348,400 935,000 Total stockholders’ equity 2,138,400 1,725,000 Total liabilities and equity $ 3,738,400 $ 2,875,000