A Corporation Has 15,000 Shares of 10%, $50 Par Cumulative

A corporation has 15,000 shares of 10%, $50 par cumulative preferred stock outstanding and 25,000 shares of no-par common stock outstanding. Dividends of $37,500 are in arrears. At the end of the current year, the corporation declares a dividend of $120,000. How is the dividend allocated between preferred and common shareholders?

A) The dividend is allocated $7,500 to preferred shareholders and $112,500 to common shareholders.
B) The dividend is allocated $112,500 to preferred shareholders and $7,500 to common shareholders.
C) The dividend is allocated $120,000 to preferred shareholders and no dividend is paid to common shareholders.
D) The dividend is allocated $75,000 to preferred shareholders and $45,000 to common shareholders.