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QuestionClassify Falcon's transactions as balance sheet (asset, liability, equity) or income statement (revenue, expense) and type (operating, investing, financing).

Studdy Solution

STEP 1

Assumptions1. All transactions are related to Falcon's financial activities. . The accounts mentioned are Falcon's accounts.
3. The classification of accounts and activities follows the generally accepted accounting principles (GAAP).

STEP 2

For transaction1, Falcon purchases common stock of Wildcat. This is an investment made by Falcon. Therefore, the related account, Investment, would be reported in the balance sheet.
Financial Statement=Balance Sheet\text{Financial Statement} = \text{Balance Sheet}

STEP 3

Since Falcon is investing in Wildcat's common stock, this is considered an asset for Falcon.
Account Classification=Asset\text{Account Classification} = \text{Asset}

STEP 4

The purchase of common stock is an investing activity.
Account Activity=Investing Activity\text{Account Activity} = \text{Investing Activity}

STEP 5

For transaction2, Falcon borrows from Wildcat by signing a note. The related account, Notes payable, would be reported in the balance sheet.
Financial Statement=Balance Sheet\text{Financial Statement} = \text{Balance Sheet}

STEP 6

Since Falcon owes money to Wildcat, this is considered a liability for Falcon.
Account Classification=Liability\text{Account Classification} = \text{Liability}

STEP 7

Borrowing money is a financing activity.
Account Activity=Financing Activity\text{Account Activity} = \text{Financing Activity}

STEP 8

For transaction3, Falcon provides services to Wildcat. The related account, Service revenue, would be reported in the income statement.
Financial Statement=Income Statement\text{Financial Statement} = \text{Income Statement}

STEP 9

Since Falcon is earning money by providing services, this is considered a revenue for Falcon.
Account Classification=Revenue\text{Account Classification} = \text{Revenue}

STEP 10

Providing services is an operating activity.
Account Activity=Operating Activity\text{Account Activity} = \text{Operating Activity}

STEP 11

For transaction4, Falcon pays interest to Wildcat on borrowing. The related account, Interest expense, would be reported in the income statement.
Financial Statement=Income Statement\text{Financial Statement} = \text{Income Statement}

STEP 12

Since Falcon is spending money to pay interest, this is considered an expense for Falcon.
Account Classification=Expense\text{Account Classification} = \text{Expense}

STEP 13

aying interest on borrowed money is an operating activity.
Account Activity=Operating Activity\text{Account Activity} = \text{Operating Activity}

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