Classification of Share Capital Practice Questions — JAMB UTME

Match each category of share capital with its correct description in financial accounting.

Click a left item, then click its matching right item

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Answer

Authorized Share Capital matches the maximum capital allowed by the Memorandum of Association; Issued Share Capital matches the portion offered to the public; Called-Up Share Capital matches the portion requested by directors; Paid-Up Share Capital matches the actual money received from shareholders.

Each share capital class denotes a distinct accounting stage: Authorized is registered ceiling, Issued is offered shares, Called-Up is demanded payment, and Paid-Up is actual cash collected.

Step-by-Step Solution

1

Identify Authorized Share Capital

Matches the description stating the legal maximum capital specified in the Memorandum of Association.

Authorized capital (also known as nominal or registered capital) sets the upper statutory ceiling of share capital a company can issue.

2

Identify Issued Share Capital

Matches the description stating the portion of authorized capital offered to the public.

Issued capital is the actual portion of nominal capital offered to investors.

3

Identify Called-Up Share Capital

Matches the description stating the portion requested by directors for payment.

Called-up capital represents installments demanded from subscribers.

4

Identify Paid-Up Share Capital

Matches the description stating the actual amount received from shareholders.

Paid-up capital is the net cash received after deducting unpaid calls in arrears from called-up capital.

Key Concept

Classification of Share Capital

Estimated Time:1m 30s

Question 2Question →

Koko Nigeria Limited was registered with an authorized share capital of 1,000,000 ordinary shares of ₦1.00 each. The directors issued 600,000 ordinary shares to the public at par, all of which were fully subscribed and allotted. A call of ₦0.80 per share was subsequently made. All shareholders paid the call in full except for a holder of 25,000 shares who failed to pay. What is the paid-up share capital of Koko Nigeria Limited?

₦460,000

₦480,000

₦500,000

₦580,000

Show answer & explanation

Answer: ₦460,000

Answer

₦460,000

The paid-up capital is the total money received from shareholders for shares called up. Subtracting calls in arrears of ₦20,000 (25,000 shares × ₦0.80) from called-up capital of ₦480,000 (600,000 shares × ₦0.80) yields ₦460,000.

Step-by-Step Solution

1

Calculate called-up capital

600,000 shares × ₦0.80 = ₦480,000

Called-up capital represents the portion of issued share capital that the company has requested shareholders to pay.

2

Calculate calls in arrears

25,000 shares × ₦0.80 = ₦20,000

Calls in arrears represent the amount requested by the company that shareholders have defaulted on.

3

Calculate paid-up capital

₦480,000 - ₦20,000 = ₦460,000

Paid-up capital is equal to called-up capital minus calls in arrears.

Key Concept

Classification and calculation of paid-up share capital from called-up capital and calls in arrears.

Question 3Question →

Meridian Logistics Plc was registered with an authorized share capital of $5,000,000$ ordinary shares of $\text{₦}1.50$ each. The directors issued $3,000,000$ shares to the public and called up $\text{₦}1.00$ per share. If all called-up funds were received except a call of $\text{₦}0.20$ per share on $150,000$ shares, calculate the total paid-up share capital of the company in Naira.

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Answer: 2970000

Answer

The paid-up capital of Meridian Logistics Plc is ₦2,970,000.

Paid-up capital represents the actual cash received from shareholders for called-up shares. The called-up capital is

3,000,000 \text{ shares} \times \text{₦}1.00 = \text{₦}3,000,000

. Calls in arrears are

150,000 \text{ shares} \times \text{₦}0.20 = \text{₦}30,000

. Deducting calls in arrears from called-up capital gives

\text{₦}3,000,000 - \text{₦}30,000 = \text{₦}2,970,000

.

Step-by-Step Solution

1

Calculate Total Called-up Capital

₦3,000,000

Multiply issued shares by called-up value per share (3,000,000 shares × ₦1.00).

2

Calculate Calls in Arrears

₦30,000

Multiply defaulting shares by unpaid call per share (150,000 shares × ₦0.20).

3

Compute Paid-up Capital

₦2,970,000

Subtract Calls in Arrears from Total Called-up Capital (₦3,000,000 - ₦30,000).

Key Concept

Classification of Share Capital - Paid-up Capital Calculation

Estimated Time:1m 30s

Question 4Question →

Apex Nigeria Limited was registered with an authorized share capital of $800,000$ ordinary shares of $\text{₦}1.00$ each. The directors offered $500,000$ shares to the public, which were fully subscribed and called up. If calls in arrears on $10,000$ shares at $\text{₦}0.20$ per share remain unpaid, what is the value of the company's paid-up share capital in Naira ( $\text{₦}$ )?

Show answer & explanation

Answer: 498000

Answer

The total paid-up share capital of Apex Nigeria Limited is ₦498,000.

Paid-up share capital is determined by deducting calls in arrears from called-up capital. Given a called-up capital of ₦500,000 (500,000 shares at ₦1.00) and unpaid calls of ₦2,000 (10,000 shares at ₦0.20), the resulting paid-up capital is ₦500,000 - ₦2,000 = ₦498,000.

Step-by-Step Solution

1

Calculate the total called-up share capital

Called-up capital = 500,000 shares × ₦1.00 = ₦500,000

Called-up capital represents the total nominal value of shares for which payment has been demanded from shareholders.

2

Calculate the total calls in arrears

Calls in arrears = 10,000 shares × ₦0.20 = ₦2,000

Calls in arrears represent the unpaid portion of the called-up capital.

3

Deduct calls in arrears from called-up capital to determine paid-up share capital

Paid-up capital = ₦500,000 - ₦2,000 = ₦498,000

Paid-up share capital is the actual amount of money paid by shareholders toward their called-up shares.

Key Concept

Calculation of Paid-up Share Capital from Called-up Capital and Calls in Arrears

Question 5Question →

Match each category of share capital on the left with its correct definition on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Authorized Capital matches the maximum legal share capital limit in the Memorandum of Association; Issued Capital matches the portion offered to the public; Called-up Capital matches the amount requested from shareholders to pay; Reserve Capital matches the portion of uncalled capital callable only during liquidation.

Each category accurately reflects its stage and function in share capital classification: Authorized capital defines the registered statutory ceiling, Issued capital represents the shares offered to investors, Called-up capital represents requested payments on issued shares, and Reserve capital is the uncalled capital reserved specifically for winding up.

Step-by-Step Solution

1

Identify the definition of Authorized Capital

Authorized Capital is the total legal limit established at incorporation as set out in the Memorandum of Association.

It forms the legal ceiling for share issuance.

2

Identify the definition of Issued Capital

Issued Capital represents the portion of authorized shares allocated/offered to subscribers.

Companies do not always issue all authorized shares at once.

3

Identify the definition of Called-up Capital

Called-up Capital is the amount requested for payment on the issued shares.

Shares may be paid in installments, making this the portion demanded so far.

4

Identify the definition of Reserve Capital

Reserve Capital is the part of uncalled capital restricted by special resolution to liquidation events.

It provides security for creditors in case of winding up.

Key Concept

Classification of Share Capital

Question 6Question →

Apex Nigeria PLC was registered with an authorized capital of $2,000,000$ ordinary shares of $\text{₦}0.50$ each. The company issued $1,200,000$ of these shares to the public. To date, the directors have called up $\text{₦}0.40$ per share on all issued shares. Shareholders have paid all amounts due except for calls in arrears totaling $\text{₦}24,000$ . What is the value of the company's paid-up share capital in Naira ( $\text{₦}$ )?

Show answer & explanation

Answer: 456000

Answer

The paid-up share capital of the company is

\text{₦}456,000

.

Paid-up capital is derived by taking the total called-up share capital (

1,200,000 \text{ shares} \times \text{₦}0.40 = \text{₦}480,000

) and subtracting the calls in arrears (

\text{₦}24,000

), resulting in

\text{₦}456,000

.

Step-by-Step Solution

1

Determine total called-up share capital

Called-up Capital =

1,200,000 \text{ shares} \times \text{₦}0.40 = \text{₦}480,000

Called-up capital represents the portion of issued share capital for which shareholders have been asked to pay.

2

Deduct calls in arrears to find paid-up share capital

Paid-up Capital = \text{₦}480,000 - \text{₦}24,000 = \text{₦}456,000$

Paid-up capital is the actual amount of money received from shareholders against the called-up capital.

Key Concept

Classification of Share Capital: Relationship between Called-up Capital, Calls in Arrears, and Paid-up Capital

Question 7Question →

Goldline Enterprises Plc was registered with an authorized share capital of $1,500,000$ ordinary shares of $\text{₦}2.00$ each. The directors issued $900,000$ ordinary shares to the public, all of which were fully called up to $\text{₦}2.00$ per share. At the end of the financial year, all call payments were received except for a final call of $\text{₦}0.50$ per share on $50,000$ shares. What is the value of the paid-up share capital of the company in Naira?

Show answer & explanation

Answer: 1775000

Answer

The paid-up share capital of Goldline Enterprises Plc is ₦1,775,000.

Paid-up share capital is the total amount of money actually paid by shareholders on the shares issued to them. It is calculated by deducting Calls in Arrears from Called-Up Capital. Here, Called-Up Capital is

900,000 \text{ shares} \times \text{₦}2.00 = \text{₦}1,800,000

. Calls in Arrears equals

50,000 \text{ shares} \times \text{₦}0.50 = \text{₦}25,000

. Subtracting

\text{₦}25,000

from

\text{₦}1,800,000

yields

\text{₦}1,775,000

.

Step-by-Step Solution

1

Calculate Total Called-Up Capital

₦1,800,000

Called-up capital equals the total number of issued shares multiplied by the called-up amount per share (900,000 shares × ₦2.00).

2

Calculate Calls in Arrears

₦25,000

Calls in arrears represent the unpaid portion of called-up capital (50,000 shares × ₦0.50).

3

Deduct Calls in Arrears from Called-Up Capital

₦1,775,000

Paid-up capital is determined by subtracting Calls in Arrears from Called-Up Capital (₦1,800,000 - ₦25,000).

Key Concept

Paid-up Share Capital Calculation

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