The records of Hoffman Company reflected the following balances in the stockholders' equity accounts at December 3 1 , 2010:

On September 1, 2010, the board of directors was considering the distribution of a $62,000 cash dividend.
No dividends were paid during 2008 and 2009. You have been asked to determine dividend amounts under two independent assumptions (show computations):

a. The preferred stock is noncumulative.

b. The preferred stock is cumulative.
Required: 1. Determine the total and per share amounts that would be paid to the common stockholders and to the preferred stockholders under the two independent assumptions. 2. Write a brief memo to explain why the dividends per share of common stock were less for the second assumption. 3. What factor would cause a more favorable per share result to the common stockholders?

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Common stock, par $12 per share, 40,000 shares outstanding. Preferred stock, 8 percent, par $10 per share, 6,000 shares outstanding. Retained earnings, $220,000.