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While preparing for an upcoming exam, you are studying with some classmates when one of them states the following: I

Question:

While preparing for an upcoming exam, you are studying with some classmates when one of them states the following:
“I always get confused when I am preparing the financing activities section of the statement of cash flows. I’m pretty certain that the payment of loan interest is a financing activity. I sometimes mix this up with how dividend payments are treated. I think that the declaration of dividends reduces retained earnings, but does not affect the statement of cash flow.”


Required

Evaluate your classmate’s response. Identify the elements that are correct and incorrect.

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...

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Payments of interest are most commonly classified as operating activitie…View the full answer


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Related Book For  answer-question
Understanding Financial Accounting

Understanding Financial Accounting

ISBN: 9781119406921

2nd Canadian Edition

Authors: Christopher D. Burnley

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Question Details
Chapter # 5
Section: Work in Progress
Problem: 2
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Question Posted: July 22, 2019 12:58:18
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