Sundowner Ltd called for subscriptions for 2 million shares. The issue price per share is $5.00 to be paid in three parts: the first payment of $2.00 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 amount of excess application transferred to allotment?
$4 000 000 |
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$3 000 000 |
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$2 000 000 |
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$0 |
Called subscription = 2 million shares | |
issue price = $5 | |
Application money = $2 | |
Within 1 month of allotment = $2 | |
Within 6 month of allotment = $1 | |
Application recerved = 3 millions | |
Allotment on pro rata basis | |
Excess application = 3000000-2000000 | |
1000000 | |
Application money received on 3 million shares (2*3000000) | 6000000 |
Application money for 2 million share (2000000*2) | 4000000 |
Excess money to be adjusted with allotment money | 2000000 |
Hence, excess application money transferred to allotment is $2 million |
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