Read the following information and answer the question.

ABC Ltd offered 20,000, 12% debentures of ₹100 each at a premium of 10% payable as ₹40 on application (including premium) and balance on allotment redeemable after 8 years. 30,000 applications are received by the company and the allotment is made on pro-rata basis. All the money on application and allotment is received by the company timely.

How much excess money is adjusted against allotment?

₹4,00,000

The correct answer is option 3- ₹4,00,000.

Application received = 30,000
Application money = ₹40 including premium
Total application money = 30,000 x 40
                                      = ₹12,00,000

Total application money required = 20,000 debentures x 40
                                                    = ₹8,00,000

Excess money adjusted against allotment  = 12,00,000 - 8,00,000
                                                                    = ₹4,00,000