(L.OBJ. 4, 5) Computing EPS and reporting a retained earnings restriction [20—25 min]
The capital structure of Galyinscape, Inc., at December 31, 2010, included 18,000 shares of $1.50 preferred stock and 40,000 shares of common stock. Common shares outstanding during 2011 were 40,000. 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. Galyinscape board of directors restricts $100,000 of retained earnings for contingencies. Retained earnings at December 31, 2010, was $100,000, and the company declared cash dividends of $27,000 during 2011.
Requirements
1. Compute Galyinscape’s earnings per share for 2011. Start with income from continuing operations. Income and loss amounts are net of income tax.
2. Show two ways of reporting Galyinscape’s rerained earnings restriction.
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