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Difficulty: Very hardTypes and Sources of Business Capital

Apex Trading PLC has an authorized share capital of 500,000500,000 ordinary shares of ₦2₦2 each. The directors issued 60%60\% of these shares to the public. The company subsequently called up ₦1.50₦1.50 per issued share. However, shareholders holding 20,00020,000 shares defaulted on paying a final call of ₦0.50₦0.50 per share. Additionally, the company's financial records show ₦150,000₦150,000 in 10%10\% debentures, current assets of ₦320,000₦320,000, and current liabilities of ₦140,000₦140,000. What is the total paid-up share capital of the company in Naira?

Answer: 440000 NGN

Answer

The total paid-up share capital of the company is ₦440,000.
Paid-up capital is calculated by determining total called-up capital (300,000 issued shares×₦1.50=₦450,000300,000 \text{ issued shares} \times ₦1.50 = ₦450,000) and subtracting unpaid calls (20,000 shares×₦0.50=₦10,00020,000 \text{ shares} \times ₦0.50 = ₦10,000), yielding a total paid-up share capital of ₦440,000.

Step-by-Step Solution

1
Calculate the total number of issued ordinary shares
300,000 shares
Issued capital is the portion of authorized capital offered to subscribers (500,000×60%=300,000500,000 \times 60\% = 300,000 shares).
2
Calculate total called-up capital
₦450,000
Called-up capital is the amount requested by the company from shareholders (300,000 shares×₦1.50=₦450,000300,000 \text{ shares} \times ₦1.50 = ₦450,000).
3
Calculate calls in arrears (unpaid called-up capital)
₦10,000
Calls in arrears represent the defaulted portion of called-up capital (20,000 shares×₦0.50=₦10,00020,000 \text{ shares} \times ₦0.50 = ₦10,000).
4
Subtract calls in arrears from total called-up capital
₦440,000
Paid-up share capital equals total called-up capital minus calls in arrears (₦450,000−₦10,000=₦440,000₦450,000 - ₦10,000 = ₦440,000).

Key Concept

Distinction between Authorized, Issued, Called-Up, and Paid-Up Capital
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Topics

Types and Sources of Business Capital

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