Presented below are the financial statements of Gaudette Ltd.

Additional information: 

1. Dividends of $33,000 were declared and paid. Gaudette reports under IFRS and does not report dividends as operating activities. 

2. During the year, equipment was sold for $10,000 cash. This equipment cost $13,000 originally and had a carrying value of $10,000 at the time of sale. 

3. All depreciation expense, $6,000, is included in the selling expense category. 

4. All sales and purchases are on account. 5. Additional equipment was purchased for $5,000 cash. 

Instructions 

a. Prepare a statement of cash flows using the indirect method. 

b. Calculate free cash flow. 

Gaudette Ltd. had a positive cash balance at the beginning and end of 2024. Given that, is it possible that the company could have had a negative cash balance at one or more points during the year? Explain.

Transcribed Image Text:

GAUDETTE LTD. Balance Sheet December 31 Assets Cash Accounts receivable Inventory Equipment Accumulated depreciation equipment Total assets Liabilities and Shareholders' Equity Accounts payable Income tax payable Notes payable Common shares Retained earnings Total liabilities and shareholders' equity 2024 $ 28,000 23,000 41,000 70,000 (27,000) $135,000 $ 31,000 26,000 20,000 25,000 33,000 $135,000 2023 $ 33,000 14,000 25,000 78,000 (24,000) $126,000 $ 43,000 20,000 10,000 25,000 28,000 $126,000