Question

Rainey Enterprises loaned $50,000 to Small Co. on June 1, Year 1, for one year at 5 percent interest.

Required
Show the effects of the following transactions in a horizontal statements. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). (Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding input needed.)

1. (1) The loan to Small Co.
2. (2) The adjustment at December 31, Year 1.
3. (3) The adjustment and collection of the note on June 1, Year 2.

RAINEY ENTERPRISES Horizontal Statements Model Equity Interest Retained Revenue * Receivable Earnings Assets Notes Receivable Date Income Statement - Expense = Net Income Statement of Cash Flow 1. 6/1/Year 1 + + + + + + 12/31/Year 2 6/1/Year 2 6/1/Year 2 6/1/Year 2 + + + +

Answer 1

Date	Cash	Notes Receivable	Interest Receivable	Retained Earnings	Revenue	Expenses	Net income	Cash Flow
6/1/Year 1	$   -50,000	$       50,000						$       -50,000	IA
12/31/Year 2			$          1,250	$             1,250	$              1,250		$       1,250
6/1/Year 2	$     50,000	$     -50,000						$         50,000	IA
6/1/Year 2	$       1,250		$        -1,250					$           1,250	OA
6/1/Year 2	$       1,250			$             1,250	$              1,250		$       1,250	$           1,250	OA