Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several
ID: 2492662 • 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 $570,000 long-term loan from Gulfport State Bank, $135,000 of which will be used to bolster the Cash account and $435,000 of which will be used to modernize equipment. The company’s financial statements for the two most recent years follow:
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.
Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 98,000 $ 220,000 Marketable securities 0 25,000 Accounts receivable, net 568,000 370,000 Inventory 1,015,000 665,000 Prepaid expenses 26,000 29,000 Total current assets 1,707,000 1,309,000 Plant and equipment, net 1,686,200 1,400,000 Total assets $ 3,393,200 $ 2,709,000 Liabilities and Stockholders Equity Liabilities: Current liabilities $ 835,000 $ 500,000 Bonds payable, 12% 600,000 600,000 Total liabilities 1,435,000 1,100,000 Stockholders' equity: Common stock, $15 par 900,000 900,000 Retained earnings 1,058,200 709,000 Total stockholders’ equity 1,958,200 1,609,000 Total liabilities and equity $ 3,393,200 $ 2,709,000Explanation / Answer
Sabin Electronics Common-Size Balance Sheets This Year Last Year Amt. % Amt. % Assets Current Assets Cash 98,000 2.89% 220,000 8.12% Marketable Securities - 0.00% 25,000 0.92% Accounts Receivables, net 568,000 16.74% 370,000 13.66% Inventory 1,015,000 29.91% 665,000 24.55% Prepaid Expenses 26,000 0.77% 29,000 1.07% Total Current Assets 1,707,000 50.31% 1,309,000 48.32% Plant & Equipment, net 1,686,200 49.69% 1,400,000 51.68% Total Assets 3,393,200 100.00% 2,709,000 100.00% Liabilities and Stockholders Equity Liabilities Current Liabilities 835,000 24.61% 500,000 18.46% Bonds Payable 12% 600,000 17.68% 600,000 22.15% Total liabilities 1,435,000 42.29% 1,100,000 40.61% Stockholders' Equity: Common Stock, $15 par 900,000 26.52% 900,000 33.22% Retained earnings 1,058,200 31.19% 709,000 26.17% Total Stockholders' Equity 1,958,200 57.71% 1,609,000 59.39% Total liabilities & equity 3,393,200 100.00% 2,709,000 100.00% Sabin Electronics Common-Size Income Statement This Year Last Year Amt. % Amt. % Sales 5,350,000 100.00% 4,560,000 100.00% Cost of Goods Sold 3,945,000 73.74% 3,520,000 77.19% Gross Margin 1,405,000 26.26% 1,040,000 22.81% Selling & Admn. Exp. 667,000 12.47% 562,000 12.32% Net Operating Income 738,000 13.79% 478,000 10.48% Interest Exp. 72,000 1.35% 72,000 1.58% Net Income Before Taxes 666,000 12.45% 406,000 8.90% Income Tax (30%) 199,800 3.73% 121,800 2.67% Net Income 466,200 8.71% 284,200 6.23%