3. Statement of Retained Earnings, Stockholders’ Equity, and Cash Flows Exercise 1 A company reported a beginning retained earnings of $500,000. The net profit for the year was $200,000, and dividends paid were $50,000. · Calculate the ending retained earnings. Exercise 2 Company Alpha Ltd. had a retained earnings balance of $1,500,000 on January 1, 2024. During 2024, it earned a net income of $750,000 and paid dividends of $200,000. Questions: a) Calculate the retained earnings balance as of December 31, 2024. b) How would this statement look in a structured format? Exercise 3 Company Beta Inc. had the following stockholders’ equity components at the beginning of the year: * Common stock: $5,000,000 * Additional paid-in capital: $500,000 * Retained earnings: $2,000,000 During the year, the company issued new shares worth $1,000,000 and paid dividends of $300,000. Questions: a) What is the final stockholders’ equity balance? b) How did the stockholders’ equity change over the year? Exercise 4 Company Gamma Ltd. reported the following cash flows for 2024: * Net income: $1,200,000 * Depreciation: $300,000 * Increase in inventory: $150,000 * Loan repayment: $400,000 * Purchase of new equipment: $600,000 * Issuance of new shares: $900,000 Questions: a) Classify the cash flow items into operating, investing, and financing activities. b) What is the net cash increase/decrease? Exercise 5 For the following items, decide (x) whether they are assets or equity or liabilities. Item Assets Equity and Liabilities FA or NCA CA Equity Liabilities Land Reserve fund Automobile Ware Money in the cash register Registered capital Short-term loan from a bank Production line Repair reserve Furniture Money in bank account Material in stock Liabilities to suppliers Building Profit Software Receivables from employees Postage stamps Lathe Social Fund Loss Computer Commitments to employees Goods in stock Accounts receivable Securities intended for trading Unfinished production Exercise 6 The following accounting transactions took place in the accounting entity. Indicate what change (+/-) in the balance sheet this is. C. Accounting case CZK A E+L Depositing money into a current account 600,000 Purchase of materials from suppliers on invoice 150,000 Payment of invoice for materials from bank loan 150,000 Purchase of a car from a supplier on invoice 350,000 The invoice for the car was paid from the BÚ 350,000 Payment of net wages to employees from the BÚ 80,000 Payment received from customers at the BÚ 420,000 Money was withdrawn from the BÚ to the treasury. 60,000 Buying a highway vignette in cash 5,000 Tax owed paid from BÚ 23,000 Part of the profit transferred to the reserve fund 170,000 Money was withdrawn from the BÚ to the treasury. 100,000 Purchasing goods in cash 40,000 Part of the profit intended for the payment of profit shares 120,000 The rest of the profit is kept as retained earnings. 30,000 Money from a long-term loan credited to a current account 500,000 Purchase of a machine on invoice from a supplier 630,000 The invoice from the supplier for the machine was paid from the BÚ 630,000 Part of the long-term loan repaid from the BÚ 150,000 Money transferred from the cash register to the bank account 50,000 Exercise 7 For the following items, decide whether they are expenses or income. Indicate what type of expense/revenue they are. Item Expense Revenue Energy consumption Travel expenses Revenue from the sale of securities Revenue from the sale of goods Goods sold (decrease) Securities sold (decrease) Postage Material consumption Revenue from the sale of the machine Loan interest Repairs to fixed assets Interest on a current account Employee wages Damage to goods due to fire Compensation from the insurance company for damage to goods Exercise 8 The following accounting transactions took place in the accounting entity. Please indicate what change (+/-) this is. C. Accounting case CZK A E+L E R 1. Rent received for leased warehouse at bank account 25,000 2. Material consumption from warehouse 70,000 3. Shortage detected in the warehouse of goods 30,000 4. Decrease in goods sold 140,000 5. Invoice from supplier for repairs 45,000 6. Fine paid in cash 3,000 7. Interest on financial investments 6,000 8. Revenue from the sale of services in cash 17,000 9. Bank account maintenance fees 1,500 10. Travel expenses paid from the cash register 4,000 13. Loan interest paid from bank account 22,000 14. Gross wages of employees 280,000 15. Revenue from the sale of materials in cash 65,000 16. Received invoice for consumed energy 18,000 17. Interest credited to bank account 1,000 18. Sales for goods received to bank account 620,000 20. Road tax paid from bank account 7,000 21. Office rent paid in cash 26,000