1. Why is paying dividends considered a financing activity? But the receipt of dividends on investment in stock is operating activity?

2. Lending $30,000 to Tegtmeier Corporation, receiving Tegtmeiers 1-year, 12% note; Why is this considered an investing activity? Wouldn't this Note Receivable be considered a current assets since its a 1 year note? I thought changes in current assets go under operating activities?

3. What kind of activity would it be considered if I borrowed money on a 1 year note? Please explain why.

4. Why do we need to subtract an increase in prepaid expenses? For example when we acquire prepaid insurance: we debit prepaid insurance & credit cash/AR. Every yr/mo this is expensed, so we would debit Insurance Expense and credit Prepaid Insurance. So when we debit this Prepaid Expense account we deduct it from the income statement. When we do the Statement of Cash Flows why wouldn't we add that deduction back, since it doesn't necessarily mean that cash was paid? In a sense I'm comparing prepaid expenses to amortization or depreciation. If a problem said that there was an increase in a prepaid asset such as insurance I would understand why cash is subtracted on the statement of cash flows but the fact that it says expenses makes it confusing. Are the accounts Prepaid Expenses and Prepaid Assets used interchangeably in this case? I hope I explained where my confusion comes from. I would really appreciate it if you could explain this to me as clearly and simply as possible.