Rainey Enterprises loaned $40,000 to Small Co. on June 1, Year 1, for one year at 6 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.

Cash flow is a statement which shows the amount of cash inflow and outflow of the company. With the help of the cash flow statement the company can determine its efficiency in managing the debt and credit in the company.

The operations of the company can be found with the CFS. The investors to the company can understand the position of the company with the cash flow statements. Financial strength of the company can be determined with cash flow statement.