Question

Sundowner Ltd called for subscriptions for 2 million shares. The issue price per share is $6.00 to be paid in three parts: the first payment of $3.00 is to be made on application, $2.00 is to be paid within 1 month of allotment and the remaining $1.00 is to be paid within 6 months of allotment. At the end of July, when applications close, applications for 3 million shares have been received. The company allotted shares on 1 August on a pro rata basis with the excess application money to be applied against the amount due on allotment. Assume all amounts on allotment are paid by the due dates. What is the balance in Share Capital after the allotment?

		$6 000 000
		$9 000 000
		$10 000 000
		$12 000 000

Answer 1

Solution: The answer is $10,000,000.

Explanation: Calculation of balance in share capital account

Opening balance of share capital account	Nil
Add: Money received on application on 2 million shares (20,00,000 * $3) (Excess application money to be used against the amount due on allotment)	$6,000,000
Add: Money due on allotment (20,00,000 * $2)	$4,000,000
Balance in share capital account	$10,000,000

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