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 $600,000 long-term loan from Gulfport State Bank, $150,000 of which will be used to bolster the Cash account and $450,000 of which will be used to modernize equipment. The company’s financial statements for the two most recent years follow: Sabin ElectronicsComparative Balance Sheet This YearLast YearAssets Current assets: Cash$110,000$250,000Marketable securities 0 28,000Accounts receivable, net 607,000 400,000Inventory 1,045,000 695,000Prepaid expenses 30,000 32,000Total current assets 1,792,000 1,405,000Plant and equipment, net 1,946,400 1,470,000Total assets$3,738,400$2,875,000Liabilities and Stockholders Equity Liabilities: Current liabilities$850,000$400,000Bonds payable, 12% 750,000 750,000Total liabilities 1,600,000 1,150,000Stockholders' equity: Common stock, $15 par 790,000 790,000Retained earnings 1,348,400 935,000Total stockholders’ equity 2,138,400 1,725,000Total liabilities and stockholders' equity$3,738,400$2,875,000 Sabin ElectronicsComparative Income Statement and Reconciliation This YearLast YearSales$5,500,000$4,650,000Cost of goods sold 3,975,000 3,550,000Gross margin 1,525,000 1,100,000Selling and administrative expenses 673,000 568,000Net operating income 852,000 532,000Interest expense 90,000 90,000Net income before taxes 762,000 442,000Income taxes (30%) 228,600 132,600Net income 533,400 309,400Common dividends 120,000 99,000Net income retained 413,400 210,400Beginning retained earnings 935,000 724,600Ending retained earnings$1,348,400$935,000 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 2/10, n/30. All sales are on account.Present the balance sheet in common-size format. Sabin ElectronicsCommon-Size Balance Sheets This YearLast YearAssets Current assets: Cash % %Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets % %Liabilities and Stockholders’ Equity Liabilities: Current liabilities % %Bonds payable, 12% Total liabilities Stockholders’ equity: Common stock, $15 par Retained earnings Total stockholders’ equity Total liabilities and equity % %

Balance sheet: A balance sheet is a financial statement that reports a company's assets,…

Answered: Paul Sabin organized Sabin Electronics…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

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 $600,000 long-term loan from Gulfport State Bank, $150,000 of which will be used to bolster the Cash account and $450,000 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	$	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 stockholders' equity	$	3,738,400	$	2,875,000

Sabin Electronics
Comparative Income Statement and Reconciliation
	This Year	Last Year
Sales	$	5,500,000	$	4,650,000
Cost of goods sold		3,975,000		3,550,000
Gross margin		1,525,000		1,100,000
Selling and administrative expenses		673,000		568,000
Net operating income		852,000		532,000
Interest expense		90,000		90,000
Net income before taxes		762,000		442,000
Income taxes (30%)		228,600		132,600
Net income		533,400		309,400
Common dividends		120,000		99,000
Net income retained		413,400		210,400
Beginning retained earnings		935,000		724,600
Ending retained earnings	$	1,348,400	$	935,000

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 2/10, n/30. All sales are on account.

Present the balance sheet in common-size format.

Sabin Electronics
Common-Size Balance Sheets
	This Year	Last Year
Assets
Current assets:
Cash		%	%
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Plant and equipment, net
Total assets		%	%
Liabilities and Stockholders’ Equity
Liabilities:
Current liabilities		%	%
Bonds payable, 12%
Total liabilities
Stockholders’ equity:
Common stock, $15 par
Retained earnings
Total stockholders’ equity
Total liabilities and equity		%	%

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.