Gault Corporation had the following shares of stock outstanding on December 31, 2018: Common stock, $50 par value, 200,000 shares outstanding Preferred stock, 8 percent, $100 par value, cumulative, 20,000 shares outstanding Dividends were in arrears for 2016 and 2017. On December 31, 2018, total cash dividends of $800,000 were declared. The total amounts payable to preferred stockholders and common stockholders, respectively, are:

Preference shares entitles the holders to participate in a fixed dividend out of the profit made by the company. The divide is always a fixed percentage of the nominal value of the preference shares

Cumulative preference shares: Cumulative simply implies that should the company misses the payment of dividend in a particular year such unpaid dividend would be carried carried forward and paid in arrears in the following year/

Non-cumulative is the exact opposite of the case . Here, unpaid dividends are not paid in arrears in fact such are forfeited for life.

Preference dividends

2016 - 8% × $100 × 20,000= $160,000

2017 - 8% × $100 × 20,000 = $160,000

2018 - 8% × $100 × 20,000 = $160,00

Total paid in 2018 480,000

Dividends paid to common stock = $600,000 -480000

= $120,000

Dividend paid to preference and ordinary shreholders are

$480,000 and $120,000 respectively