Citrus Inc.declared and paid cash dividends of $100,000 on common stock and $75,000 on preferred stock.How would these dividends be presented in Citrus' statement of cash flows?
A) As a $100,000 reduction in cash flows from investing activities
B) As a $175,000 reduction in cash flows from investing activities
C) As a $100,000 reduction in cash flows from financing activities
D) As a $175,000 reduction in cash flows from financing activities

Question

Quizplus · Accepted Answer

Dividends paid, whether on common or preferred stock, are classified as financing activities in the statement of cash flows. Therefore, the total amount paid out in dividends, $175,000 in this case, would be shown as a reduction in cash flows from financing activities.