Metal Ltd. issued 1,25,000 shares of ₹10 each to public. The issue was underwritten by Gold, Silver, Bronze and Copper as under: Gold 30%, Silver 25%, Bronze 25% and Copper 20%. The issue was firm underwritten by the und

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2016
Metal Ltd. issued 1,25,000 shares of ₹10 each to public. The issue was underwritten by Gold, Silver, Bronze and Copper as under: Gold 30%, Silver 25%, Bronze 25% and Copper 20%. The issue was firm underwritten by the underwriters as under: Gold: 4,000 shares; Silver: 6,000 shares; Bronze: Nil; Copper: 15,000 shares. Public subscription excluding firm underwriting but including marked applications were 90,000 shares. The applications were marked as under: Gold : 24,000 shares Silver : 20,000 shares Bronze : 12,000 shares Copper : 24,000 shares Ascertain the liability of each underwriter, assuming firm underwriting shares be treated as un-marked applications.

Answer & Explanation:

Under-Writer's Liability Particulars Gold (30%) Silver (25%) Bronze (25%) Copper (20%) Total (100%) Gross Liability 37,500 31,250 31,250 25,000 1,25,000 Less: Marked Application (24,000) (20,000) (12,000) (24,000) 80,000 Less: Unmarked in gross liability ratio (10,500) (8,750) (8,750) (7,000) 35,000 Balance 3,000 2,500 10,500 (6,000) 10,000 Credit of Copper's gross liability ratio (2,250) (1,875) (1,875) 6000 NIL Balance 750 625 8,625 NIL 10,000 Add: Firm Underwriting 4,000 6,000 NIL 15,000 25,000 Net Liability 4,750 6,625 8,625 15,000 35,000 Working Note (i) Total unmarked (including Firm) = 90,000 - 80,000 + 25,000 = 35,000

Topics: Company Accounts

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