The financial statements for Royale and Cavalier companies are summarized here: Royale Cavalier Company Company Balance Sheet Cash Accounts Receivable, Net Inventory Equipment, Net Other Assets Total Assets Current Liabilities Note Payable (long-term) Common Stock (par $20) Additional Paid-in Capital Retained Earnings Total Liabilities and Stockholders' Equity Income Statement Sales Revenue Cost of Goods Sold Other Expenses Net Income Other Data Per share price at end of year Selected Data from Previous Year Accounts Receivable, Net Note Payable (long-term) Equipment, Net Inventory Total Stockholders' Equity $ 27,000 $ 47,000 57.000 18,000 114,000 29,000 554,000 164,000 142,000 48,000 $894,000 $306,000 $124,000 $ 19,000 194,000 59,000 482,000 212,000 52,000 42,000 6,000 10,000 $894,000 $306,000 $806,000 $286,000 482,000 152,000 242,000 97,000 $ 82,000 $ 37,000 $ 20.00 $ 16.00 $ 49,000 $ 16,000 194,000 59,000 164,000 554,000 97,000 40.000 576,000 228,000 These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $77,000 cash and Cavalier Company is asking for $32,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analys but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account.