To determine the authorized capital of the public limited liability company in question, we need to understand a few key concepts related to shares and capital structure.
Step-by-Step Explanation
- Understanding Nominal Capital:
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Nominal capital (also known as authorized capital) refers to the total value of shares that a company is authorized to issue to shareholders. It is the maximum amount of share capital that a company can issue to its shareholders as stated in its memorandum of association.
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Calculating Nominal Capital:
- In this case, the company has 200,000 ordinary shares with a nominal value of 50k each.
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To find the nominal capital, we multiply the number of shares by the nominal value per share:
[
\text{Nominal Capital} = \text{Number of Shares} \times \text{Nominal Value per Share}
]
[
\text{Nominal Capital} = 200,000 \text{ shares} \times 0.50 \text{ Naira} = 100,000 \text{ Naira}
]
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Understanding Issued Capital:
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The company decided to issue 50% of its nominal capital to the public. However, this does not affect the calculation of the authorized capital. The issued capital is the portion of the nominal capital that has actually been issued to shareholders.
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Conclusion:
- The authorized capital of the company is therefore 100,000 Naira, which corresponds to option C.
Why the Current Recorded Correct Option is Wrong
The current recorded correct option is B (N50,000), which is incorrect. The confusion may arise from misunderstanding the terms "authorized capital" and "issued capital."
- Option A (N40,000): This is incorrect because it does not reflect any calculation based on the number of shares and their nominal value.
- Option B (N50,000): This is incorrect as it does not represent the total nominal value of the shares. It seems to be a miscalculation or misunderstanding of the nominal value.
- Option C (N100,000): This is the correct answer, as calculated above.
- Option D (N200,000): This option represents the total number of shares multiplied by the nominal value, but it does not reflect the actual authorized capital since it does not consider the nominal value correctly.
Common Pitfalls
- Confusing authorized capital with issued capital. Remember, authorized capital is the total amount a company can issue, while issued capital is what has actually been issued.
- Miscalculating the nominal value by not properly multiplying the number of shares by the nominal value per share.
Revision Summary
- Authorized capital is the maximum amount of share capital a company can issue.
- It is calculated by multiplying the number of shares by the nominal value per share.
- In this case, the authorized capital is 100,000 Naira (200,000 shares × 0.50 Naira).
- Be careful to distinguish between authorized capital and issued capital to avoid confusion in calculations.