Question

Rainey Enterprises loaned $50,000 to Small Co. on June 1, 2018, for one year at 9 percent interest.

Required

Show the effects of the following transactions in a horizontal statements. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). For any element not affected by the event, leave the cell blank. (Not every cell will require entry. Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.)

1. (1) The loan to Small Co.
2. (2) The adjusting entry at December 31, 2018.
3. (3) The adjusting entry and collection of the note on June 1, 2019.

Rainey Enterprises loaned $50,000 to Small Co. on June 1, 2018, for one year at 9 percent interest.

Required

Show the effects of the following transactions in a horizontal statements. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). For any element not affected by the event, leave the cell blank. (Not every cell will require entry. Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign.)

1. (1) The loan to Small Co.
2. (2) The adjusting entry at December 31, 2018.
3. (3) The adjusting entry and collection of the note on June 1, 2019.

Answer 1

Solution:

Rainey Enterprises
Horizontal Statements Model
Date		Assets			=	Liab.	+	Equity	Income Statement			Statement of cash flow
		Cash +	Notes Receivable +	Interest Receivable	=			Retained Earnings	Revenue -	Expense   =	Net Income
1	6/1/2018	-50000	50000									-50000	IA
2	12/31/2018			2625				2625	2625		2625	0	NA
3	6/1/2018			1875				1875	1875		1875	0	NA
	6/1/2018	54500	-50000	-4500								50000	IA
	6/1/2018											4500	OA