Falcon Incorporated has the following transactions with Wildcat Corporation. Transactions Falcons Related Account 1. Falcon purchases common
Question:
Falcon Incorporated has the following transactions with Wildcat Corporation.
Transactions | Falcon’s Related Account |
1. Falcon purchases common stock of Wildcat. | Investment |
2. Falcon borrows from Wildcat by signing a note. | Notes payable |
3. Falcon provides services to Wildcat. | Service revenue |
4. Falcon pays interest to Wildcat on borrowing. | Interest expense |
Required:
1. For each transaction, indicate whether Falcon would report the related account in the balance sheet or income statement.
2. For accounts in the balance sheet, indicate whether it would be classified as an asset, liability, or stockholders’ equity. For accounts in the income statement, indicate whether it would be classified as a revenue or an expense.
3. Indicate whether each transaction is classified as operating, investing, or financing activity.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Financial Accounting
ISBN: 978-1259914898
5th edition
Authors: David Spiceland, Wayne M. Thomas, Don Herrmann