Question

VL Ltd. offered for public subscription 90,000 equity shares of ₹ 10 each at a premium of 10%. The entire amount was payable on application. Applications were received for 1,00,000 shares and allotment was made to all the applicants on pro-rata basis. The amount received on application was___.

• A. ₹ 10,00,000
• B. ₹ 9,00,000
• C. ₹ 9,90,000
• D. ₹ 11,00,000

Hint:

When shares are allotted on a pro-rata basis, always calculate amount received only on the number of shares actually allotted—not the number applied.

Answer 1

The Correct Option is C

Step 1: Total shares applied for = 1,00,000
Step 2: Total shares issued = 90,000
As allotment was on a pro-rata basis, application money will be received for 90,000 shares only.
Step 3: Calculate issue price per share:
Face Value = ₹ 10, Premium = 10% of ₹ 10 = ₹ 1
Total Issue Price = ₹ 11 per share
Step 4: Calculate total amount received:
\[90,000 \times 11 = ₹ 9,90,000\]