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UI Post-UTME Financial Accounting 2025 (Model questions) Question 20

Question 20

Company Accounts

A company issued 500,000 ordinary shares of ₦1 each at a premium of 50 kobo per share. Applications were received for 600,000 shares. Allotment was made pro rata. Which of the following are TRUE?
I. Total cash received on full subscription would be ₦750,000
II. Shares were oversubscribed by 100,000
III. Share premium account is credited with ₦250,000
IV. Excess application money must be refunded or transferred

  1. A.I and II only
  2. B.II, III and IV only
  3. C.I, II and III only
  4. D.All of the above
Show the answer and explanation

Answer: D (All of the above)

Explanation

500,000 × ₦1.50 = ₦750,000; 600,000 − 500,000 = 100,000 oversubscribed; premium = 500,000 × ₦0.50 = ₦250,000; the extra application money must be returned or applied to allotment.