Response to the following problem:
The stockholders' equity section of Senorita's Restaurant at December 31, 2007, is as follows:
Preferred stock, 10%, $10 par, 2,000 shares
authorized, 1,000 shares issued $ 10,000
Additional paid-in capital--preferred 50,000
Common stock, $1 par value,
authorized 10,000 shares, issued 6,000 shares 6,000
Additional paid-in capital--common 30,000
Retained earnings 70,000
Total contributed capital and retained earnings $166,000 Less: Treasury stock (1,000 common shares at cost) 13,000
Total stockholders' equity $153,000
Senorita's Restaurant has been in business for several years, but has paid no dividends for the first two years due to a temporary downturn in business. During the current year (year 3), Senorito's has net earnings of $30,000, and the company's board of directors intends to pay $4,000 as a total dividend.
Calculate the amount of dividends that each class of stockholder will receive assuming the preferred stock is:
A. cumulative and nonparticipating
B. noncumulative and participating
C. cumulative and participating.