The following are the financial statements of Gil Company. GIL COMPANYIncome StatementFor the Year Ended December 31,

Question:

The following are the financial statements of Gil Company.

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GIL COMPANYIncome StatementFor the Year Ended December 31, 2021

Sales ............................................................. $242,000Cost of goods sold ........................................ 175,000Gross profit ..................................................... 67,000Operating expenses ....................................... 24,000Income from operations ............................... 43,000Interest expense .............................................. 3,000Income before income taxes ....................... 40,000Income tax expense ........................................ 8,000Profit ............................................................ $ 32,000

Additional information:

1. Dividends declared and paid were $20,000. Gil reports under ASPE.

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 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.

Taking It Further

Gil 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.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For  book-img-for-question

Accounting Principles Volume 2

ISBN: 978-1119502555

8th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

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