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Rainey Enterprises loaned $40,000 to Small Co. on June 1, 2018, for one year at 7...

Rainey Enterprises loaned $40,000 to Small Co. on June 1, 2018, for one year at 7 percent interest. Show the effects of the following transactions in a horizontal statements. In the Cash Flow column, indicate wheter the item is an (OA), (IA), or a (FA).

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

How would the Horizontal Statements Model look like?

Solutions

Expert Solution

Balance Sheet Income Statement Statement of Cash Flows
Asset = Liab + Stckholder's Equity
Event No Cash + Loan Given + Interest receivable = Payable + Common Stock + Ret Earning Rev - Exp = Net Income
1        -40,000 + 40000 + N/A = N/A + N/A + N/A N/A - N/A = N/A -40000 IA
2 N/A + N/A +                             1,633 = N/A + N/A + N/A         1,633 - N/A =              1,633 N/A FA
3 40000 + -40000 + N/A = N/A + N/A + N/A N/A - N/A = N/A 40000 IA
3 2800 + N/A + -1633 = N/A + N/A + N/A 1167 - N/A = 1167 2800 FA
Note-
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ekkarill92 answered 1 year ago
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