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. Wildcat pays dividends to Falcon. Dividend revenue
4. Falcon provides services to Wildcat. Service revenue
5. Falcon pays interest to Wildcat on borrowing. Interest expense
Required: 1. For each transaction, indicate whether Falcon 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.