Payment of dividends of $40,000 in Financing Activities section
Payment of dividends of $40,000 in Operating Activities section
Correct answer. The Beginning Balance (B.B.) of RE + Net Income/-Net Loss – Dividends = the Ending Balance (E.B.) Net Income amounts to $70,000 (50,000+40,000-20,000). Under U.S. GAAP, payment of dividends is a Financing Activity. Under the indirect method in the Operating Activities section, Net Income of $70,000 is listed at the top.