A. Credit card interest that is incurred will decrease equity because it is an expense that will reduce income, and therefore retained earnings. Interest paid is an operating activity on the statement of cash flows so it will be recorded as an operating cash outflow.
B. Interest paid is classified as an operating activity on the statement of cash flows. See the correct answer for a complete explanation.
C. Interest expense incurred will have an effect on equity on the balance sheet. See the correct answer for a complete explanation.
D. Interest expense incurred will have an effect on equity on the balance sheet, and interest paid will be classified as an operating activity on the statement of cash flows. See the correct answer for a complete explanation.
