P17.5B (LO 2, 4 ) AP Presented below are the financial statements of Gaudette Company. Prepare a cash flow statement-indirect method-and calculate free cash flow. 2020 GAUDETTE COMPANY Balance Sheet December 31 Assets 2021 Cash $ 28,000 $ 33,000 Accounts receivable 23,000 14,000 Inventory 41,000 25,000 Equipment 70,000 78,000 Accumulated depreciation equipment (27,000) (24,000) Total $135,000 $126,000 Liabilities and Shareholders' Equity Accounts payable $ 31,000 $ 43,000 Income taxes payable 26,000 20,000 Notes payable 20,000 10,000 Common shares 25.000 25,000 Retained earnings 33,000 28,000 Total $135,000 $126.000 GAUDETTE COMPANY Income Statement For the Year Ended December 31, 2021 Sales $286,000 Cost of goods sold 194,000 Gross profit 92,000 Selling expenses $28,000 Administrative expenses 9,000 37.000 Profit from operations 55.000 Interest expense 7.000 Profit before income taxes 48,000 Income tax expense 10,000 Profit $ 38,000 Additional information: 1. Dividends of $33,000 were declared and paid. Gaudette reports under ASPE. 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 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