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Assignment 2.2 Handout

1. Airborne Manufacturing, Co., completed the following transactions during 2009:

Record the transactions in Airborne’s general journal.

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.

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.

Financial Statement Case
Use the 2009 Financial Statements handout to answer the following questions.

R1. Show how computed basic earnings per share of $2.08 for 2009. (Ignore diluted earnings per share of $2.04.)
R2. Prepare a T-account to show the beginning and ending balances and all activity in Retained earnings (Accumulated Deficit) for 2009.
R3. How much in cash dividends did pay out during 2009? Explain your answer.
R4. How much treasury stock did have at December 31, 2009? Explain.


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