Smith Company elected to use the cumulative earnings approach for distributions from its equity-method investment purchased at the beginning of 20X1. During 20X1, Smith earned $244,000 on the investment and received $110,000 in dividends. In its statement of cash flows—direct method, Smith should report the dividends as a(n):
a. investing activity.
b. financing activity.
c. noncash investing and financing activity.
d. operating activity.