Problem:

A firm has an outstanding issue of 1,000 shares of preferred stock with a $100 par value and 7 percent annual dividend. The firm also has 15,000 shares of common stock outstanding. If the stock is cumulative and the board of directors has passed the preferred dividend for the prior two years, how much must the preferred stockholders is paid prior to paying dividends to common stockholders?

Describe in detail and provide all workings and methods.