Lawson Company has a capital structure that includes non-cumulative, participating preferred stock and common stock. The 3% preferred stock has 4,000 shares outstanding with a par value of $100 and the common stock has 12,000 shares outstanding with a $10 par value.

Required:

Prepare an allocation between preferred and common stock of a $36,000 dividend under each of the following assumptions:

1. The preferred stock is partially participating up to 5% (label your answer).

2. The preferred stock is fully participating (label your answer and do not round the percentage).