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. Application were received for 600,000 shares out ...

Answer Details

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.