Ade Company Limited has an authorized capital of... | WAEC SSCE - Commerce - 2012 (Essay)

Question 1 Report

Ade Company Limited has an authorized capital of 80,000 shares of N20 each, out of which 30,000 shares have been fully subscribed by the public and allotted as at 31st March 2006. Other assets and liabilities were:

Creditors	35,000
Motor van	90,000
Buildings	65,000
Stock	60,000
Debtors	15,000
Cash	5,000

You are required to calculate:

(a) Issued capital
(b) Unissued capital
(c) Total Assets
(d) Working capital.

Answer

Ade Company Limited: capital and asset calculations

(a) Issued capital

Issued capital is the value of the shares that have been offered to and taken up by the public. Only 30,000 of the shares have been subscribed and allotted, each of nominal value N20.

Issued capital = \(30{,}000 \times N20 = N600{,}000\)

(b) Unissued capital

Unissued capital is the part of the authorised capital that has not yet been offered to the public. Authorised capital is 80,000 shares; 30,000 have been issued, leaving 50,000 shares.

Unissued capital = \((80{,}000 - 30{,}000) \times N20 = 50{,}000 \times N20 = N1{,}000{,}000\)

(c) Total assets

Total assets are the sum of all the fixed and current assets of the company.

Asset	Amount (N)
Motor van	90,000
Buildings	65,000
Stock	60,000
Debtors	15,000
Cash	5,000
Total assets	235,000

Total assets = \(N235{,}000\)

(d) Working capital

Working capital = Current assets - Current liabilities. The current assets are stock, debtors and cash; the current liability is creditors.

Current assets = \(60{,}000 + 15{,}000 + 5{,}000 = N80{,}000\)

Current liabilities (creditors) = \(N35{,}000\)

Working capital = \(N80{,}000 - N35{,}000 = N45{,}000\)

Read lesson note on Business Capital And Profits (WAEC)

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