To solve the problem, we need to determine how many shares will be allocated to a subscriber who applied for 5,000 shares, given the total number of shares available and the total number of applications received. We will also calculate the refund due to this subscriber based on the pro-rata distribution of shares.
Step-by-Step Explanation
- Understanding the Share Issue:
- Sariki Company Ltd plans to issue a total of 400,000 shares at a price of N1.20 per share.
-
Applications were received for 600,000 shares, but 100,000 shares were dishonored. This means that only 500,000 shares are valid applications.
-
Calculating the Pro-rata Allocation:
- The total number of valid applications is 500,000 shares (600,000 applied - 100,000 dishonored).
- The company can only issue 400,000 shares. Therefore, we need to calculate the proportion of shares that each applicant will receive based on the total applications.
The formula for pro-rata allocation is:
[
\text{Pro-rata allocation} = \frac{\text{Total shares available}}{\text{Total valid applications}} \times \text{Shares applied for}
]
For our case:
[
\text{Pro-rata allocation} = \frac{400,000}{500,000} \times 5,000
]
-
First, calculate the fraction:
[
\frac{400,000}{500,000} = 0.8
]
-
Now, apply this fraction to the shares applied for:
[
0.8 \times 5,000 = 4,000 \text{ shares}
]
-
Calculating the Refund:
-
The subscriber applied for 5,000 shares but will only receive 4,000 shares. Therefore, the number of shares that will not be allocated (and thus will be refunded) is:
[
5,000 - 4,000 = 1,000 \text{ shares}
]
-
Since each share was issued at N1.20, the total refund due to the subscriber is:
[
\text{Refund} = 1,000 \text{ shares} \times N1.20 = N1,200
]
Conclusion
The correct answer is
B. N1,200.
Explanation of Other Options
-
A. N1,000: This option is incorrect because it does not account for the correct number of shares that were not allocated. The refund should be based on the number of shares not received, which is 1,000 shares, not 833 shares (which would yield N1,000).
-
C. N4,800: This option is incorrect as it seems to miscalculate the refund based on an incorrect assumption of shares or price. The calculation does not align with the pro-rata distribution.
-
D. N6,000: This option is also incorrect. It suggests a refund based on an incorrect number of shares or price, which does not reflect the actual allocation and refund process.
Revision Summary
- Sariki Company Ltd issued 400,000 shares at N1.20 each.
- Valid applications totaled 500,000 shares after accounting for dishonored applications.
- Pro-rata allocation resulted in the subscriber receiving 4,000 shares out of 5,000 applied.
- The refund due to the subscriber is N1,200 for the 1,000 shares not allocated.