A company declares a total dividend of \$20,000, but preferred shareholders are due \$25,000. What are the implications for both preferred and common shareholders?

Preferred shareholders receive \$20,000, and common shareholders receive the remaining \$5,000 shortfall.

Preferred shareholders receive their full \$25,000 entitlement, and common shareholders receive nothing.

Both preferred and common shareholders receive a proportionate share of the total \$20,000.

Preferred shareholders receive the entire \$20,000, and common shareholders receive nothing.