A limited company has an authorized capital of 20,000,000 shares. If each share capital cost 50k and the company sold 12,000,000 shares. Its issued capital ...

This question tests the distinction between authorized capital and issued capital, and the calculation used to find issued capital.

Authorized capital is the maximum value of shares a company is legally permitted to offer, as stated in its memorandum of association. Issued capital, on the other hand, is the value of the shares the company has actually sold or allotted to shareholders out of that authorized total. It is calculated as:

Here, the company has sold 12,000,000 shares, and each share costs 50 kobo, which is \( \text{N}0.50 \). Substituting these values:

The issued capital is therefore N6,000,000. The full authorized capital, by contrast, would be \( 20{,}000{,}000 \times \text{N}0.50 = \text{N}10{,}000{,}000 \), which represents the maximum the company could raise, not what it has actually raised so far by selling only 12,000,000 of its authorized shares.

When solving this type of question, always multiply the number of shares that were actually sold, not the full authorized number, by the value of a single share.