A company invited applications for 25,000 equity shares of Rs 10 each and received 30,000 applications along with the application money of Rs 4 per share. Which of the following alternatives can be followed?
I. Refund the excess applications.
II. Make pro rata allotment to all the applicants, and refund the excess application money.
III. Not to allot any shares to some applicants, full allotment to some of the applicants and pro rata allotment to the rest of the applicants.
IV. Not to allot any shares to some applicants and make pro rate allotment to other applicants.
V. Make pro rata allotment to all the applicants and adjust the excess money received towards call money.

Only (II) above

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Both (I) and (IV) above

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All (I), (II), (Ill), (IV) and (V) above

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Only (III) above

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Solution

The correct option is C All (I), (II), (Ill), (IV) and (V) above
Oversubscription is the case when a company receives application more than the issued shares.
These extra 5000 shares can be treated in the following ways:
1. The company may refund the amount received on these 5000 excess shares.
2. Prorata allotment can be made in which the shares can be re-adjusted as per the conditions.
3. The company can resolve the problem be rejecting some of the shares, full allotment to some shares and making pro-rata allotment to the rest of the shares.
4. Reject some of the shares and make pro-rata allotment to rest of the shares.
5. The company can even make pro-rata allotment to all shares and the excess money can be used in fulfilling the calls money.

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Similar questions

Q. A company invited applications for certain number of equity shares and received applications for more number of shares along with the applications money. Which of the following alternative can be followed?
I. Refund the excess applications.
II. Make pro-rata allotment to all the applicants, and no refund of excess application money.
III. Not to allot any shares to some applicants, full allotment to some of the applications and pro-rata allotment to the rest of the applicants.
IV. Not to allot any shares to some applicants and make pro-rata allotment to other applicants.

Alfa Limited invited applications for 4,00,000 of its equity shares of Rs 10 each on the following terms :

Payable on application	Rs 5 per share
Payable on allotment	Rs 3 per share
Payable on first and final call	Rs 2 per share

Applications for 5,00,000 shares were received. It was decided :

(a) to refuse allotment to the applicants for 20,000 shares;

(b) to allot in full to applicants for 80,000 shares;

(d) to utilise excess application money in part as payment of allotment money.

One applicant, whom shares had been allotted on pro-rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued @ Rs 9 per share. Show the journal and prepare Cash book to record the above.

A company issued 4,000 equity shares of Rs. 10 each at par payable as under :

On application Rs. 3; On allotment Rs. 2; On first call Rs. 4 and on final call Rs. 1 per share

Applications were received for 13,000 shares. Applications for 3,000 shares were rejected and pro-rata allotment was made to the applicants for 10,000 shares. How much amount will be received in cash on the first call? Excess application money is adjusted towards the amount due on allotment and calls.

Q. A company offered 30,000 shares of ₹10 each, payable as ₹3 on application, ₹2 on allotment, and the balance on the first and final call. Applications were received for 50,000 and allotment was made on a pro rata basis. The excess application money was to be adjusted on allotment. How much will be transferred from a share application account to a share allotment account?

[0.88 marks]

When the application for some shares are rejected outrightly and pro-rata allotment is made to the remaining applicants, the money on rejected applications are ______.

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