Barrister Information Systems Corp. develops, assembles, markets, and services computer systems and local area networks for law firms. Headquartered in Buffalo, New York, it has offices in 19 U.S. cities.

Barrister Information Systems has two classes of preferred stock-A and C-in addition to its common stock. The 1,300 shares of Series A preferred stock are nonvoting, have a \(12 \%\) cumulative dividend, have liquidation preference rights over the Series C preferred stock and the common stock, and are callable by the company at any time for \(\$ 1,000\) per share plus cumulative unpaid dividends. Each share of Series A preferred stock is convertible into 500 shares of common stock. As of March 31, 1993, the cumulative unpaid dividends on the Series A preferred stock totaled \(\$ 254,000\).

\section*{Instructions}

(a) Should the \(\$ 254,000\) in dividends not paid be reported as a liability on the balance sheet?

(b) If the par value of the Class A preferred stock is \(\$ 100\) per share, what dollar amount in dividends can the shareholders expect annually on the Class A preferred stock?