Page 255 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Working Note:
Total application received by the company. 15,200 shares
Less : Marked Applications (3,000 + 4,500 + 1,700) 9,200 shares
Unmarked Application 6,000 shares

As no relief is given on firm applications to underwriters, firm application will be treated as
unmarked.
Total unmarked applications 6,000 + 3,000 = 9,000 including firm applications = 6,000 + 3,000 =
9000 shares
Illustration 16
A Ltd. has an authorized capital of 50,00,000 divided into 5,00,000 shares of 10 each. The
company issued 1,00,000 shares for subscription to the public at a premium of 5 each. The entire
issue was underwritten as follows:

A – 60,000 shares (Firm underwriting – 10,000 shares)
B – 30,000 shares (Firm underwriting – 4,000 shares)
C –10,000 shares (Firm underwriting – 2,000 shares)
On the total issue only 90,000 shares including.

Firm underwriting were subscribed for. Marked applications were as follows:
A – 32,000 shares
B – 20,000 shares
C – 8,000 shares

Calculate the liability of each underwriter.
Solution:
Statement Showing the Liability of Underwriter in Shares
Underwriters
Particulars Total
A B C
Gross Liability 60,000 30,000 10,000 1,00,000
Less: Marked Applications 32,000 20,000 8,000 60,000
28,000 10,000 2,000 40,000
Less: Unmarked applications divided in the
gross liability
ratio (6:3:1) 18,000 9,000 3000 30,000
10,000 1000 –1,000 10,000
Less: Surplus of C distributed between A & B in 667 333 +1,000 –
gross liability ratio (2:1)
Net liability 9,333 667 Nil 10,000
Add : Firm underwriting 10,000 4,000 2,000 16,000
Total liability 19,333 4,667 2,000 26,000

Unmarked Applications = 90,000 - (32,000 + 20,000 + 8000) = 30,000.

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