A total of 400.000 shares of N1 each are to be issued by Suleiman company ltd at a price of $1.20 per share. Application were received for 600 000 shares out of which 100 000 were dishonoured. if the available shares are distributed prorata,what refund will be due to a subscriber who applied for 5000 shares.?
To determine the refund due to a subscriber who applied for 5000 shares, we need to follow these steps:
Step 1: Calculate the total amount of shares available after dishonored applications:
Total shares issued = 400,000 shares
Shares applied for = 600,000 shares
Shares dishonored = 100,000 shares
Total shares available = Total shares issued - Shares dishonored
Total shares available = 400,000 shares - 100,000 shares = 300,000 shares
Step 2: Calculate the pro-rata allocation for each share:
Pro-rata allocation = Shares available / Shares applied for
Pro-rata allocation = 300,000 shares / 600,000 shares
Pro-rata allocation = 0.5
Step 3: Calculate the allocated shares for the subscriber:
Allocated shares = Pro-rata allocation * Subscriber's applied shares
Allocated shares = 0.5 * 5,000 shares
Allocated shares = 2,500 shares
Step 4: Calculate the refund due to the subscriber:
Refund due = (Subscriber's applied shares - Allocated shares) * Price per share
Refund due = (5,000 shares - 2,500 shares) * $1.20
Refund due = 2,500 shares * $1.20
Refund due = $3,000
Therefore, the refund due to the subscriber who applied for 5000 shares would be $3,000.