Cash Flow Statement: Cash flow statement is that statement in which, transaction related to cash are recorded. It is mandatory report and included in the financial statement of the company. It is divided into three parts operating activities, investing activity, and financial activity Operating Activity: Operating activity is the first part of the cash flow statement. The main focuses of the operating activity on the cash inflow and outflow from the selling goods, providing services and manufacturing. Long term capital and investing cost are not included in the operating activity. Financial Activity: Financial activity is the part of the cash flow statement. Financial activity involves the long term liability, borrowing and stockholder’s equity. All the changes in the long term liability, equity and borrowings reported in the financial statement. Investing Activity: Investing activity is the third part of the cash flow statement which gives the information related to the acquisition and disposal of the long term assets of the company such as land and building, investment and plant. To Prepare: Cash flow statement by direct method.

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Chapter 12, Problem 8PSA

To determine

Cash Flow Statement:

Cash flow statement is that statement in which, transaction related to cash are recorded. It is mandatory report and included in the financial statement of the
company. It is divided into three parts operating activities, investing activity, and financial activity

Operating Activity:

Operating activity is the first part of the cash flow statement. The main focuses of the operating activity on the cash inflow and outflow from the selling goods, providing services and manufacturing. Long term capital and investing cost are not included in the operating activity.

Financial Activity:

Financial activity is the part of the cash flow statement. Financial activity involves the long term liability, borrowing and stockholder’s equity. All the changes in the long term liability, equity and borrowings reported in the financial statement.

Investing Activity:

Investing activity is the third part of the cash flow statement which gives the information related to the acquisition and disposal of the long term assets of the company such as land and building, investment and plant.

To Prepare: Cash flow statement by direct method.

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Jones Co. had $61,500 in sales during 2025. During the year, Jones purchased $18,400 in inventory. The company began the year with $4,100 in inventory and ended the year with $1,300 in inventory. In addition, during 2025, Jones received a prepayment of $2,500, which was correctly classified as unearned revenue. What was Jones's gross profit during 2025? A. $38,000 B. $40,300 C. $39,600 D. $42,100 E. None of the above