A total of 400,000 shares of N1 each are to be issued by Sariki company Ltd at a price of N1.20 per share. Application were received for 600,000 shares out of which 100,000 were dishonored. If the available share were distributed pro-rata, what refund will be due a subscriber who applied for 5,000 shares?

ijeoma.u

1 year ago

The total number of shares applied for is 600,000, but only 500,000 shares are available (400,000 issued and 100,000 dishonored). This means that each subscriber will be allocated 5/6 of the shares they applied for.

For a subscriber who applied for 5,000 shares, the number of shares allocated to them will be 5,000 x 5/6 = 4,167 shares.

The total amount paid by the subscriber for these shares will be 4,167 x ₦1.20 = ₦5,000.40.

However, the subscriber only applied for 5,000 shares at a cost of ₦6,000. Therefore, the refund due to the subscriber will be:

Refund = Amount paid - Amount due
Refund = ₦6,000 - ₦5,000.40
Refund = ₦999.60

Therefore, the refund due to the subscriber who applied for 5,000 shares is ₦999.60. Option A, ₦1,000, is the closest answer to the actual refund due.

Badge Plc issued 450,000 ordinary shares