tmackenz Wrote: ------------------------------------------------------- > i did the sample with this question in it last > night, and yes its b > confused me as well, but that’s the answer Does the sample provide an explanation? I think we’re all thoroughly confused now.
Its NOT the bank’s interest being classified as operating which is confusing. …but rather why the manufacturing firm has interest income classified as investing even though in the readings any interest income received is classified as operating. Just to re-iterate: The Regional Bank of Australia receives interest income on the loans it has outstanding. (Operating) - fair enough Durango Manufacturing Inc. also receives interest income on some surplus funds they currently have invested in corporate bonds. (answer says investing??) and the readings lead you to believe its operating.
the issue here is business activity vs. cash flow. if it was asked as what type of cash flow the answer would be operating for both. but the question asks what type of business activity is mentioned, if you notice there is no mention of cash flow in the question. hence B is correct.
Wow, I completely overlooked the wording on this. This question, although tricky, seems like it will probably not be representative of what will be on the exam.
The subject line is misleading.
brianr Wrote: ------------------------------------------------------- > Wow, I completely overlooked the wording on this. > > This question, although tricky, seems like it will > probably not be representative of what will be on > the exam. You are underestimating the exam. Get used to reading and comprehension of the question’s text. You are not required to read beyond the scope of it. This type of question is VERY LIKELY.
jut111 Wrote: ------------------------------------------------------- > the issue here is business activity vs. cash flow. > if it was asked as what type of cash flow the > answer would be operating for both. > > but the question asks what type of business > activity is mentioned, if you notice there is no > mention of cash flow in the question. > > hence B is correct. You’re right. Divs & interest received, and interest paid are CFO under US GAAP. The subject line was misleading.