The following are the financial statements of Gil Ltd. 

Additional information: 

1. Dividends declared and paid were $20,000. Gil reports under IFRS and does not report dividends as operating activities. 

2. During the year, equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a carrying value of $8,500 at the time of sale. 

3. All depreciation expense, $14,500, is included in the operating expenses. 

4. All sales and purchases are on account. 

Instructions 

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

b. Calculate free cash flow.

Gil 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.  

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GIL 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 $ 38,000 30,000 27,000 60,000 (29,000) $126,000 $ 24,000 7,000 27,000 18,000 50,000 $126,000 2023 $ 20,000 14,000 20,000 78,000 (24,000) $108,000 $ 15,000 8,000 33,000 14,000 38,000 $108,000