Avtar Ltd. invited application for 80,000 shares of Rs10 each payable Rs5/-. on Application, Rs 3/- on allotment and Rs 2/- on call. Public had applied for 2,50,000 shares out of which application for 30,000 shares were rejected and remaining were allotted on pro-rata basis. Excess application money was adjusted against allotment only. Determine the amount to be refunded at the time of allotment of shares.

Rs 6,10,000

The correct answer is Option (2) → Rs 6,10,000

Shares issued = 80000
Applications received = 250000
Rejected applications = 30000

Money refunded on rejected shares = 30000 x 5
                                                          = 150000

Remaining applications = 250000 - 30000
                                 = 220000

On 220000 pro-rata is made and 80000 shares are issued.

Application money received on 220000 applications = 220000 x 5
                                                                          = ₹1100000
Excess money received on (220000-80000) shares i.e. 140000
Excess money = 140000 x 5
                      = ₹700000

Allotment money due = 80000 x 3
                               = ₹240000

Money refunded on selected applications = 700000 - 240000
                                                                   = 460000

Total money refunded on allotment = 460000 + 150000
                                                          = ₹610000