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Difficulty: HardTypes and Sources of Business Capital

Sterling Heights Plc issued 5,000,0005,000,000 ordinary shares of ₦2.00₦2.00 each to the public. The directors called up ₦1.50₦1.50 per share. All money called was received except for a default on 200,000200,000 shares where shareholders failed to pay the ₦0.50₦0.50 call portion of the called-up amount. What is the total paid-up capital of the company in Naira?

Answer: 7400000 ₦

Answer

The total paid-up capital of the company is ₦7,400,000.
Paid-up capital measures the actual sum received by a company from its shareholders. It is derived by taking the total called-up capital (5,000,000 shares×₦1.50=₦7,500,0005,000,000 \text{ shares} \times ₦1.50 = ₦7,500,000) and deducting the calls in arrears (200,000 shares×₦0.50=₦100,000200,000 \text{ shares} \times ₦0.50 = ₦100,000), yielding ₦7,400,000₦7,400,000.

Step-by-Step Solution

1
Calculate Total Called-Up Capital
₦7,500,000
Called-up capital represents the total portion of issued share capital that the company has requested shareholders to pay.
2
Calculate Calls in Arrears
₦100,000
Calls in arrears represents the unpaid portion of the called-up capital due from defaulting shareholders.
3
Subtract Calls in Arrears from Called-Up Capital
₦7,400,000
Paid-up capital is the actual amount of money received by the company from its shareholders for shares issued.

Key Concept

Distinction and relationship between Called-Up Capital, Calls in Arrears, and Paid-Up Capital
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Topics

Types and Sources of Business Capital

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