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. GAUDETTE COMPANY Balance Sheet December 31 Assets 2021 2020 Cash $ 28,000 $ 33,000 Accounts 23,000 14,000 receivable Inventory 41,000 25,000 Equipment 70,000 78,000 Accumulated (27,000) (24,000) depreciation -equipment Total $135,000 $126,000 Liabilities and Shareholders' Equity Accounts $ 31,000 $ 43,000 payable Income taxes 26,000 20,000 payable 20,000 10,000 25,000 25,000 Notes payable Common shares Retained earnings Total 33,000 28,000 $135,000 $126,000 GAUDETTE COMPANY Income Statement For the Year Ended December 31, 2021 Sales $286,000 Cost of goods 194,000 sold Gross profit 92,000 Selling $28,000 expenses Administrative 9,000 37,000 expenses Profit from 55,000 operations Interest 7,000 expense Profit before 48,000 income taxes Income tax 10,000 expense 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. Taking It Further Gaudette Company had a positive cash balance at the beginning and end of 2021. Given that, is it possible that the company could have had a negative cash balance at one or more points during the year? Explain