Read the following passage and answer the questions.
On January 1, 2024, the Director of X Ltd. issued for public subscription 50,000 equity shares of ₹10 each at ₹12 per share payable, ₹5 on application (including premium), ₹4 on allotment and the balance on call on May 01, 2024. The issue was closed on February 10, 2024 by which date applications for 70,000 shares were received. Of the cash received ₹40,000 was returned and ₹60,000 was applied to the amount due on allotment, the balance of which was paid on February 16, 2024. All the shareholders paid the call due on May 01, 2024 with the exception of an allottee of 500 shares. These shares were forfeited on September 29, 2024 and reissued as fully paid at ₹8 per share on November 01, 2024. The company, as a matter of policy, does not maintain a calls-in-arrears account.
What is the amount of excess application money credited to share allotment and money refunded on rejected application in totality?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 1,00,000
When a share issue is oversubscribed, the application money on the extra shares is either refunded on rejected applications or adjusted towards the allotment money due from the allottees. Both come out of Equity Share Application Account in one entry.
Application money received = 70,000 × Rs. 5 = Rs. 3,50,000
Application money needed for 50,000 shares allotted = 50,000 × Rs. 5 = Rs. 2,50,000
Excess = Rs. 3,50,000 − Rs. 2,50,000 = Rs. 1,00,000
Of this, refunded = Rs. 40,000 and credited to allotment = Rs. 60,000
Total = Rs. 40,000 + Rs. 60,000 = Rs. 1,00,000
Both parts are asked for “in totality”, so picking only the refund (Rs. 40,000) or only the adjusted part (Rs. 60,000) gives half the answer.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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