E10-55. (Learning Objectives 2, 3, 4: Accounting for changes in shareholders’ equity)

Clubhouse, Inc., ended 20X6 with 7 million shares of $1 par ordinary share issued and outstanding.

Beginning additional paid-in capital was $10 million, and Retained Earnings totaled

$35 million:

■ In April 20X7, Clubhouse issued 5 million shares of ordinary shares at a price of $4 per share.

■ In June, the company distributed a 10% share dividend at a time when Clubhouse’s ordinary shares had a market value of $6 per share.

■ Then in September, Clubhouse’s share price dropped to $2 per share and the company purchased 4 million shares of treasury share.

■ For the year, Clubhouse earned net income of $24 million and declared cash dividends of

$13 million.

Requirement 1. Complete the following tabulation to show what Clubhouse should report for shareholders’

equity at December 31, 20X7. Journal entries are not required.

Transcribed Image Text:

(Amounts in millions) Balance, Dec 31, 20X6. Issuance of shares........................... Share dividend...... Purchase of treasury shares. Net income...... Cash dividends... Balance, Dec 31, 20X7....................... Ordinary Shares Additional Paid-In + Capital Retained + Earnings Treasury Total Shares = Equity $7 $10 $35 0 $52