Question

Rainey Enterprises loaned $40,000 to Small Co. on June 1, 2018, for one year at 6 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) The loan to Small Co. (2) The adjusting entry at December 31, 2018. (3) The adjusting entry and collection of the note on June 1, 2019. RAINEY ENTERPRISES Horizontal Statements Model Assets = Equity Income Statement Notes Interest - Retained * Receivable * Receivable - Earnings Revenue - Expense = Net Income Date Statement of Cash Flow Cash + + 1. 6/1/18 2. 12/31/18 3. 6/1/19 6/1/19 6/1/19 + + +

Answer 1

= Income statement Equity Common Stock Date Assets Notes Receivable 40,000 Statement of Cashflow Cash + Interest Receivable + + Revenues . Expenses - Net Income eivable (40,000) (40,000) IA NA 1,400 06/01/18 12/31/18 06/01/19 06/01/19 06/01/19 1,400 1,000 1,400 1,000 1,000 (40,000) 40,000 2,400 NA 40,000 IA 2,400 OA (2,400) Accrued interest as on 31st December 2018 is = (40000*6%*(7/12)) = $ 1,400/. Accrued interest as on 1st January 2019 to 31st May 2019 is = (40000*6%*(5/12)) = $ 1,000/.

Answer 2

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/year 1	-40,000	40,000									-40,000	IA
2	12/31/year 1			1,400				1,400	1,400		1,400	-	NA
3	6/1/Year 2(Adjusting Entry)			1,000				1,000	1,000		1,000	-	NA
	6/1/year 2( collection of the note )	42,400	-40,000	-2,400								40,000	IA
												2,400	OA
Interest Receivable   = 40,000*6%*7/12=$1,400
Interest Receivable   = 40,000*6%*5/12=$1,000