All of the following statements related to preparation of the statement of cash flows are true except:
A)A company may report cash flows from operating activities using either the direct or indirect method.
B)Interest expense may be reported under operating or financing based on which one results in better cash flows.
C)Cash dividends paid to shareholders are classified as a financing activity.
D)Purchase of an intangible asset is classified as an investing activity.
E)Repaying the principal of notes payable is classified as a financing activity.

Question

Quizplus · Accepted Answer

Interest expense should always be reported under operating activities using either the direct or indirect method, depending on which method the company chooses to use. It cannot be reported under financing activities based on which results in better cash flows.

All of the Following Statements Related to Preparation of the Statement