Problem:
The capital structure of Rodeswell, Inc., at December 31, 2010, included 30,000 shares of $2.00 preferred stock and 40,000 shares of common stock. Common stock outstanding during 2011 totaled 40,000 shares. Income from continuing operations during 2011 was $104,000. The company discontinued a segment of the business at a gain of $20,000, and also had an extraordinary gain of $10,000. The Rodeswell board of directors restricts $98,000 of retained earnings for contingencies. Retained earnings at December 31, 2010, was $98,000 and the company declared preferred dividends of $60,000 during 2011.
Required:
Question 1: Compute Rodeswell's earnings per share for 2011. Start with income from continuing operations. All income and loss amounts are net of income tax.
Question 2: Show two ways of reporting Rodeswell's retained earnings restriction.
Note: Provide support for your rationale.