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Difficulty: MediumTypes and Sources of Business Capital

BlueWave Marine Plc has an authorized share capital of 2,000,0002,000,000 ordinary shares of ₦5₦5 each. The company issued 80%80\% of its authorized shares to the public and subsequently called up ₦4₦4 per share. All shareholders paid the call in full except for holders of 50,00050,000 shares who defaulted on the payment. What is the total paid-up capital of the company in Naira?

Answer: 6200000 ₦

Answer

The total paid-up capital of the company is ₦6,200,000₦6,200,000.
Paid-up capital is the portion of called-up capital that shareholders have actually paid into the business. First, 80%80\% of the 2,000,0002,000,000 authorized shares equals 1,600,0001,600,000 issued shares. Calling up ₦4₦4 per share yields a called-up amount of ₦6,400,000₦6,400,000. Since holders of 50,00050,000 shares defaulted on ₦4₦4 per share, the unpaid calls in arrears total ₦200,000₦200,000. Subtracting ₦200,000₦200,000 from ₦6,400,000₦6,400,000 results in a total paid-up capital of ₦6,200,000₦6,200,000.

Step-by-Step Solution

1
Determine the number of issued shares
1,600,0001,600,000 shares
The company issued 80%80\% of its 2,000,0002,000,000 authorized shares (0.80×2,000,000=1,600,0000.80 \times 2,000,000 = 1,600,000).
2
Calculate total called-up capital
₦6,400,000₦6,400,000
The directors requested ₦4₦4 per share across all 1,600,0001,600,000 issued shares (1,600,000×₦4=₦6,400,0001,600,000 \times ₦4 = ₦6,400,000).
3
Calculate calls in arrears
₦200,000₦200,000
Holders of 50,00050,000 shares failed to pay the requested ₦4₦4 per share (50,000×₦4=₦200,00050,000 \times ₦4 = ₦200,000).
4
Compute net paid-up capital
₦6,200,000₦6,200,000
Paid-up capital represents actual cash received, which equals Called-Up Capital minus Calls in Arrears (₦6,400,000−₦200,000=₦6,200,000₦6,400,000 - ₦200,000 = ₦6,200,000).

Key Concept

Paid-Up Capital and Calls in Arrears
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Topics

Types and Sources of Business Capital

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