Problem:
If you have $800,000 of 8% preferred stock and $1,200,000 of common stock outstanding, each having a par value of $10 per share, and no dividends have been paid or declared during 2009 and 2010. Then as of December 31, 2011, it is desired to distribute $488,000 in dividends, how how much will the preferred and common stockholders receive under each of the following assumptions:
(a) The preferred is noncumulative and nonparticipating.
(b) The preferred is cumulative and nonparticipating.