Effects of Changes in Inventory and Accounts Payable Balances on Statement of Cash Flows Copeland…

Effects of Changes in Inventory and Accounts Payable Balances on Statement of

Cash Flows

Copeland Antiques reported a net loss of $33,200 for the year ended December 31, 2008. The following

items were included on Copeland’s balance sheets at December 31, 2008 and 2007:

Copeland uses the indirect method to prepare its statement of cash flows. Copeland does not

have any other current assets or current liabilities and did not enter into any investing or financing

activities during 2008.

Required

1. Prepare Copeland’s 2008 statement of cash flows.

2. Draft a brief memo to the president explaining why cash increased during such an unprofitable

year.