Response to the following problem:
The capital structure of Smirnoff, Inc., at December 31, 20X6, included 20,000 shares of $1.25 preferred stock and 46,000 shares of common stock. Common stock outstanding during 20X7 totaled 46,000 shares. Income from continuing operations during 20X7 was $94,000. The company discontinued a segment of the business at a gain of $23,000, and also had an extraordinary gain of $11,500. Smirnoff's board of directors restricts $60,000 of retained earnings for contingencies.
Required:
1. Compute Smirnoff's earnings per share. Start with income from continuing operations. All income and loss amounts are net of income tax.
2. Show two ways of reporting Smirnoff's retained earnings restriction. Retained earnings at December 31, 20X6, was $100,000, and Smirnoff declared cash dividends of $20,000 during 20X7.