The transactions in this problem are identical to those in E12, but now with a focus on

Question:

The transactions in this problem are identical to those in E1–2, but now with a focus on Wildcat.

Transactions

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.

Wildcat’s Related Account

Common stock

Notes receivable

Dividend

Service fee expense

Interest revenue

Required:

1. For each transaction, indicate whether Wildcat would classify the related account as an (a) asset, (b) liability, or (c) stockholders’ equity to be reported in the balance sheet; a (d) revenue or (e) expense to be reported in the income statement; or an (f) dividend to be reported in the statement of stockholders’ equity.

2. Classify the type of activity as financing, investing, or operating.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...