Page 252 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 10: Underwriting of Shares

Solution: Notes
In the books of Mr. Hanuman
Underwriting Account
Amount Amount
Date Particulars Shares Date Particulars Shares

To Bank Account – 13,000 By Bank Account – 2,00,000
(Expenses) (5% Commission
on 40 lacs)
To Bank Account 80,000 2,40,000 By Bank Account 24,000 1,56,000
(Payment of (Amount received
application from Bhima on
money) 24,000 shares @
6.5 per shares.
To Bank Account – 2,80,000
(Payment of
allotment money)
To Bank Account – 48,000 By Bank Account 36,000 3,24,000
(Commission to (Sale of 36,000
Bhima @ 4% on shares @ 9 each)
12,00,000 i.e., 30%
of the issue)
To Bank Account – 1,96,000 By balance c/d @ 20,000 1,50,356
(Payment of final 7.5178 at cost
call on 56,000 price.
share)
To Profit and Loss – 53,356
A/c.
80,000 8,30,356 80,000 8,30,356
Working Note:

Calculation of cost of shares

Total amount paid on 80,000 shares @ 6.50 5,20,000
Expenses 13,000
Underwriting Commission 48,000
5, 81,000

Less: Amount Received on 24,000 shares
@ 6.5 per share from Bhima 1,56,000
Underwriting Commission 2,00,000 3,56,000
2,25,000

Add: Payment of final call on 56,000 shares @ 3.5 1,96,000
Cost of 56,000 shares 4,21,000

4,21,000
Cost per share =  7.5178
56,000
Cost of 20,000 shares = 20,000 × 7.5178 = 1,50,356

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