Under U.S.GAAP, the classification of interest expense as a(n) _____ activity and dividends paid on common or preferred shares as a(n) _____ activity appears inconsistent to some observers as both are payments to suppliers of funds.
A)operating; financing
B)investing; financing
C)financing; investing
D)financing; operating
E)investing; operating

Question

Quizplus · Accepted Answer

Under U.S. GAAP, interest expense is classified as an operating activity because it is considered part of the entity's ongoing major or central operations, while dividends paid on common or preferred shares are classified as a financing activity, reflecting the cost of obtaining financial resources.

Under USGAAP, the Classification of Interest Expense as A(n) _____ Activity