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COBLEM 14–18 Common-Size Statements and Financial Ratios for a Loan Application LO14–1, 14-2, LO14–3, L014–4 ul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on ich he had secured patents. Although the company has been fairly profitable, it is now experiencing a vere cash shortage. For this reason, it is requesting a $500,000 long-term loan from Gulfport State Bank, 00,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modern- e 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 $ 70,000 $ 150,000 Marketable securities 18,000 Accounts receivable, net 480,000 300,000 Inventory Prepaid expenses 950,000 600,000 .....- 20,000 22,000 Total current assets 1,520,000 1,090,000 Plant and equipment, net 1,480,000 $3,000,000 $2,460,000 1,370,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 800,000 $ 430,000 Current liabilities Bonds payable, 12% 600,000 600,000 Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par Retained earnings... 750,000 750,000 850,000 680,000 Total stockholders' equity 1,600,000 $3,000,000 $2,460,000 1,430,000 Total liabilities and stockholders' equity ... Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $5,000,000 $4,350,000 Cost of goods sold Gross margin . Selling and administrative expenses 3,875,000 3,450,000 1,125,000 900,000 653,000 548,000 Net operating income Interest expense Net income before taxes 472,000 352,000 72,000 400,000 72,000 280,000 Income taxes (30%) 120,000 84,000 Net income 280,000 196,000 Common dividends 110,000 170,000 95,000 101,000 Net income retained Beginning retained earnings 680,000 579,000 Ending retained earnings $ 850,000 $ 680,000

COBLEM 14–18 Common-Size Statements and Financial Ratios for a Loan Application LO14–1, 14-2, LO14–3, L014–4 ul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on ich he had secured patents. Although the company has been fairly profitable, it is now experiencing a vere cash shortage. For this reason, it is requesting a $500,000 long-term loan from Gulfport State Bank, 00,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modern- e 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 $ 70,000 $ 150,000 Marketable securities 18,000 Accounts receivable, net 480,000 300,000 Inventory Prepaid expenses 950,000 600,000 .....- 20,000 22,000 Total current assets 1,520,000 1,090,000 Plant and equipment, net 1,480,000 $3,000,000 $2,460,000 1,370,000 Total assets Liabilities and Stockholders' Equity Liabilities: $ 800,000 $ 430,000 Current liabilities Bonds payable, 12% 600,000 600,000 Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par Retained earnings... 750,000 750,000 850,000 680,000 Total stockholders' equity 1,600,000 $3,000,000 $2,460,000 1,430,000 Total liabilities and stockholders' equity ... Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales $5,000,000 $4,350,000 Cost of goods sold Gross margin . Selling and administrative expenses 3,875,000 3,450,000 1,125,000 900,000 653,000 548,000 Net operating income Interest expense Net income before taxes 472,000 352,000 72,000 400,000 72,000 280,000 Income taxes (30%) 120,000 84,000 Net income 280,000 196,000 Common dividends 110,000 170,000 95,000 101,000 Net income retained Beginning retained earnings 680,000 579,000 Ending retained earnings $ 850,000 $ 680,000

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Personal Finance
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ISBN:9781337669214
Author:GARMAN
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For both this year and last year:

a. Present the balance sheet in common-size format

b. Present the income statement in common-size format down through net income

PROBLEM 14-18 Common-Size Statements and Financial Ratios for a Loan Application LO14–1, LO14-2, LO14-3, LO14-4 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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modern- ize 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 .... $ 70,000 $ 150,000 Marketable securities 18,000 Accounts receivable, net 480,000 300,000 Inventory 950,000 600,000 Prepaid expenses 20,000 22,000 Total current assets 1,520,000 1,090,000 Plant and equipment, net. 1,480,000 $3,000,000 $2,460,000 1,370,000 Total assets ....... Liabilities and Stockholders' Equity Liabilities: $ 800,000 $ 430,000 600,000 600,000 Current liabilities Bonds payable, 12% Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par Retained earnings... 750,000 750,000 850,000 680,000 Total stockholders' equity 1,600,000 1,430,000 Total liabilities and stockholders' equity ... $3,000,000 $2,460,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales. $5,000,000 $4,350,000 Cost of goods sold Gross margin Selling and administrative expenses 3,875,000 3,450,000 1,125,000 900,000 .... 653,000 472,000 548,000 Net operating income 352,000 ... Interest expense.. 72,000 72,000 Net income before taxes . 400,000 280,000 Income taxes (30%) 120,000 84,000 Net income 280,000 196,000 110,000 170,000 Common dividends 95,000 101,000 Net income retained Beginning retained earnings Ending retained earnings 680,000 $ 850,000 579,000 $ 680,000
Transcribed Image Text:PROBLEM 14-18 Common-Size Statements and Financial Ratios for a Loan Application LO14–1, LO14-2, LO14-3, LO14-4 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 $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modern- ize 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 .... $ 70,000 $ 150,000 Marketable securities 18,000 Accounts receivable, net 480,000 300,000 Inventory 950,000 600,000 Prepaid expenses 20,000 22,000 Total current assets 1,520,000 1,090,000 Plant and equipment, net. 1,480,000 $3,000,000 $2,460,000 1,370,000 Total assets ....... Liabilities and Stockholders' Equity Liabilities: $ 800,000 $ 430,000 600,000 600,000 Current liabilities Bonds payable, 12% Total liabilities 1,400,000 1,030,000 Stockholders' equity: Common stock, $15 par Retained earnings... 750,000 750,000 850,000 680,000 Total stockholders' equity 1,600,000 1,430,000 Total liabilities and stockholders' equity ... $3,000,000 $2,460,000 Sabin Electronics Comparative Income Statement and Reconciliation This Year Last Year Sales. $5,000,000 $4,350,000 Cost of goods sold Gross margin Selling and administrative expenses 3,875,000 3,450,000 1,125,000 900,000 .... 653,000 472,000 548,000 Net operating income 352,000 ... Interest expense.. 72,000 72,000 Net income before taxes . 400,000 280,000 Income taxes (30%) 120,000 84,000 Net income 280,000 196,000 110,000 170,000 Common dividends 95,000 101,000 Net income retained Beginning retained earnings Ending retained earnings 680,000 $ 850,000 579,000 $ 680,000
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.
Transcribed Image Text: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.
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