Question

Supreme ltd. Has allotted $5000$ shares to the applicants of $7500$ shares on pro-rata basis. The amount on application is Rs. $3$ per share. M applied for $600$ shares. The number of shares allotted to M will be and the amount carried forward for adjustment against allotment money from M will be __________.

• A. $200$ shares; Rs. $200$
• B. $300$ shares; Rs. $300$
• C. $400$ shares; Rs. $600$
• D. $150$ shares; Rs. $450$

Answer 1

The correct option is C $400$ shares; Rs. $600$

Pro-rata allotment is a situation when amount received on excess shares is either adjusted or refunded back to the shareholders. In every case shares allotted to people are less than the shares applied by them. This can be formulated as follows:

$SharesAlloted=\frac{Totalsharesalloted}{Totalsharesapplied}\times SharesApplied$

Substitute values in above equation

$SharesAlloted=\frac{5,000shares}{7,500shares}\times 600shares=400shares$

Thus, shares allotted to M by Supreme Ltd. are 400 shares.

The excess amount is that amount which the company gets when amount received on the application of shares by public is more than the amount demaded or allotted by the company. And this can be calculated as under:

$ExcessMoney=Moneyreceivedonapplication-Moneyreceivedonallotment$

Substitute values in the above equation

$ExcessMoney=600shares\times Rs3-400shares\times Rs3=Rs600$

The excess money adjusted on allotment is $Rs600$.