Computing EPS and reporting a retained earnings restriction [20-25 min]
The capital structure of Blacksmith, Inc., at December 31, 2011, included 18,000 shares of $1 preferred stock and 38,000 shares of common stock. Common stock outstandingduring 2012 totaled 38,000 shares. Income from continuing operations during 2012was $108,000. The company discontinued a segment of the business at a gain of$26,000 and also had an extraordinary gain of $12,000. The Blacksmith board ofdirectors restricts $99,000 of retained earnings for contingencies. Retained earnings atDecember 31, 2011, was $99,000, and the company declared preferred dividends of$18,000 during 2012.
Requirements
1. Compute Blacksmith’s earnings per share for 2012. Start with income from continuing operations. All income and loss amounts are net of income tax.
2. Show two ways of reporting Blacksmith’s retained earnings restriction.
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