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JAMB Principles of Accounts 1995 Question 42

Question 42

Company Accounts

A total of 400 000 shares of ₦1 each are to be issued by Sariki Company Ltd. at a price of ₦1.20 per share. Applications were received for 600 000 shares out of which 100 000 were dishonoured. If the available shares are distributed pro rata, what refund will be due a subscriber who applied for 5 000 shares?

  1. A.₦1 000
  2. B.₦1 200
  3. C.₦4 800
  4. D.₦6 000
Show the answer and explanation

Answer: B (₦1 200)

Explanation

Valid applications = 600 000 − 100 000 = 500 000 for 400 000 shares, i.e. 80%. The subscriber gets 4 000 of 5 000 shares. He paid 5 000 × 1.20 = ₦6 000 but owes 4 000 × 1.20 = ₦4 800, so the refund is ₦1 200.