2. 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.

Requirements

R1. Compute Rodeswell's earnings per share for 2011. Start with income from continuing operations. All income and loss amounts are net of income tax.

R2. Show two ways of reporting Rodeswell's retained earnings restriction.