Falcon Incorporated has the following transactions with Wildcat Corporation. Transactions                                    Falcon’s Related Account 1. Falcon purchases common stock of Wildcat.  2. Falcon borrows from Wildcat by signing a note. 3. Falcon provides services to Wildcat. 4. Falcon pays interest to Wildcat on borrowing.   Investment  Notes payable  Service revenue 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.

Question

Falcon Incorporated has the following transactions with Wildcat Corporation.

Transactions                                    Falcon’s Related Account

1. Falcon purchases common stock of Wildcat. 

2. Falcon borrows from Wildcat by signing a note.

3. Falcon provides services to Wildcat.

4. Falcon pays interest to Wildcat on borrowing.

  •   Investment
  •  Notes payable
  •  Service revenue
  • 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.

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