Concept explainers
Falcon Incorporated has the following transactions with Wildcat Corporation.
Identify account classifications and business activities (LO1–2)
Flip Side of E1–3
Transactions | Falcon’s Related Account |
1. Falcon purchases common stock of Wildcat. 2. Falcon borrows from Wildcat by signing a note. 3. Wildcat pays dividends to Falcon. 4. Falcon provides services to Wildcat 5. Falcon pays interest to Wildcat on borrowing. |
Investment Notes payable Dividend revenue Service revenue Interest expense |
Required:
1. For each transaction, indicate whether Falcon would classify each account in the balance sheet as (a) an asset, (b) a liability, or (c) stockholders’ equity; in the income statement as (d) a revenue or (e) an expense; or in the statement of stockholders’ equity as (f) a dividend.
2. Classify the type of activity as financing, investing, or operating.
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Financial accounting
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