Question

Sue E. Corp is a corporate shareholder in Cosmo Corp, an unrelated company. When Cosmo pays...

Sue E. Corp is a corporate shareholder in Cosmo Corp, an unrelated company. When Cosmo pays cash dividends to its shareholders, Sue E. reports these dividend payments from Cosmo on its statement of cash flows as a(n):

A) Operating activity.

B) Investing activity.

C) Financing activity.

D) Noncash investing and financing activity.

E) This is not reported in the statement of cash flows.

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Homework Answers

Answer #1

Answer: Option A) Operating activity.

Explanation

Dividend received from investments in other enterprises.

Dividends received by a sue E Coprp  for its own investments in Cosmo corp. are reported as an operating activity under GAAP. An operating activity is any activity engaged in by a company that has a direct impact on its cash flow, whether it is inflow or outflow of money from the company. Dividends received are an indication of the income that are coming into the company as they are paid out as a result of the company's own financial investment portfolio in other company.

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