Question

Rainey Enterprises loaned $45,000 to Small Co. on June 1, Year 1, for one year at 9 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 loaned $45,000 to Small Co. on June 1, Year 1, for one year at 9 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) The loan to Small Co. (2) The adjustment at December 31, Year 1. (3) The adjustment and collection of the note on June 1, Year 2. Answer is complete but not entirely correct. RAINEY ENTERPRISES Horizontal Statements Model Equity Interest Retained Revenue Receivable Earnings Income Statement Date Assets Notes Receivable 45,000+ Cash Statement of Cash Flow + Net Income Expense 1. + (45,000) (45,000) ΙΑΝ 2. 6/1/Year 1 12/31/Year 2 6/1/Year 2 + + 2.025 X = 2,025 x 2,025 X 2,025 3. + + 2,025 x 2,025 X - 2,025 X 2,025 X = (4,050) X = 6/1/Year 2 45,000 X + (45,000 + IAM 45,000 4,050 x 6/1/Year 2 + + ОА М
   

Answer 1

RAINEY ENTERPRISES Horizontal Statements Model Equity Interest Retained Revenue Receivable Earnings = Income Statement Date Assets Notes Receivable 45000 Statement of Cash Flows Cash + Expense = Net Income -45000 + + = -45000 IA 1 2 3 + + 6/1/Year 1 12/31/Year 1 6/1/Year 2 6/1/Year 2 6/1/Year 2 2363 1687 2363 1687 2363 1687 2363 1687 + + 45000 + -45000 + 45000 IA 4050 + + -4050 = 4050 OA December 31, Year 1: Interest Expense = $45,000 * 9.00% * 7/12 Interest Expense = $2,362.50 or $2,363 June 01, Year 2: Interest Expense = $45,000 * 9.00% * 5/12 Interest Expense = $1,687.50 or $1,687