Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several

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 $540,000 long-term loan from Gulfport State Bank, 5120,000 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: Sabin Electronics Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities S 86,000 190,000 529,000 960,000 22,000 635,000 26,000 Prepaid expenses Total current assets Plant and equipment, net 1,597,000 1,631,600 1,213,000 1,410,000 Total assets $3,228,600 2,623,000 Liabilities and Stockholders Equity Liabilities Current iabilities Bonds payable, 12% S 820,000 800,000 470,000 800,000 Total liabilities 1,620,000 1,270,000 equ Common stock, $20 par 730,000 878,600 730,000 Retained earnings Total stockholders' equity Total liabilities and equity 623,000 1,353,000 $3,228,600 S 2,623,000 1,608,600 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold S5,200,000 S 4,470,000 3,490,000 3,915,000 Gross margin Selling and administrative 1,285,000 681,000 980,000 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 98,400 229,600 93,000 Net income 369,600 114,000 255,600 623,000 Net income retained 136,600 486,400 Ending retained earnings S 878,600 S 623,000

Explanation / Answer

Question - 1 (a)

Question - 2

Formula This Year Last year Book value per share = Common stock equity / No of shares = 44.07 37.07

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