Royce Company had the following transactions during the fiscal year ended December 31, 2005:

      ●Accounts receivable decreased from $115,000 on December 31, 2004 to $100,000 on December 31,2005.

      ● Royce's board of directors declared dividends on December 31, 2005 of $.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, 2006. The company did not declare or pay dividends for fiscal 2004.

      ● Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000.

      ● Paid interest to bondholders of $780,000.

      ● The cash balance was $106,000 on December 31, 2004 and $284,000 on December 31, 2005.

Royce Company uses the direct method to prepare its statement of cash flows at December 31, 2005. The interest paid to bondholders is reported in the

A. Investing section, as a use or outflow of cash.

B. Financing section, as a use or outflow of cash.

C. Debt section, as a use or outflow of cash.

D. Operating section, as a use or outflow of cash.