Read the following scenario, then answer the questions that follow.

VentureOne is authorizing shares and forming a corporation. VentureOne authorizes one million shares of stock valued at $1/share to be issued to potential shareholders. The founder invests $100,000 in cash and $100,000 in assets to fund the company. Six months later, the company issues 50,000 shares to an investor at $5/share.

 

How many shares of stock does the company issue to the founder?

What percent of the company does the founder own?

After six months, how much had the investor put into the company?

After six months, what percent of the company does the investor own? What percent does the founder own?

Before we solve the question first we should know what is authorised capital and issued capital.

Authorised capital :- It is the total capital which can be issued by the company. It is the limit to issue share by the company. In above case it is 1 million.

Issued capital :- It is the amount of the capital company raise from the financial market. In above case it is 50,000 shares @ 5 = 250,000. It can never be more than authorised capital.

Now come to the question.

Answer (1) 200,000 shares @$1 = $200,000

As it doesn't mention the rate at Which capital is issued then we assumed that it is issued as authorised @$1.

Answer (2) 20% of authorised capital and 100% of issued capital.

As the total authorised capital is 1 million and founder own 2,00,00 worth shares 

200,000/1,000,000*100 =20%

Owner have 20% of total share and 100% of issued capital.

Answer (3) 50,000 shares @ $5 = $2,500,00 worth of share.

After six months company issued share 50,000 @$5 per share 2,500,000 worth of shares. 

Answer (4) Inventors = 25% of authorised capital and  55.56% of issued capital. 

Owner = 20% of authorized capital and 44.44% of issued capital.

Issued capital

Owner = 200,000/450,000*100 = 44.44%

Investors = 250,000/450,000*100 = 55.56% 

Authorized capital 

Owner = 200,000/1,000,000*100 =20%

Investors = 250,000/1,000,000*100 =25%