Bharat Chemicals Ltd. 50,000. Paid to Rama Swami
& Sons ? 16,000; Underwriters Liability Bharat Investment Co. Ltd. 4,000 shares and Rama
Swami & Sons 1,600 shares.
up
9. Bharat Investment Co. Ltd. agreed to underwrite 5,00,000 shares of Bharat Chemicals Ltd. for a
commission of 5%. The underwriters then entered into an arrangement with X, by which later
agreed to sub-underwrite ? 1,00,000 of the said 7 5,00,000 shares for a commission of 4%.
In course the prospectus of Bharat Chemicals Ltd. was published, offered the shares at par, but
public only applied for 80% thereof and accordingly the Underwriters were required to take up 20%.
At a later date Bharat Investment Co. Ltd. realised the shares they had been called upon to take
at a price of 97%. Prepare the necessary accounts showing the profit or loss earned by Bharat
Investment Co. Ltd. & also give journal entries.
Ans. Profit # 18,600; Underwriting Commission from Bharat Chemicals Ltd. ? 25,000 and Paid to
X*4,000; Underwriters Liability : Bharat Investment Company Ltd. shares of 1,00,000 and
X-shares of 20,000.
0. Ganesh Ltd. offered for subscription 40,000 equity shares of? 10 each payable as : 73 on application;
*4 on allotment and 3 on first and final call. Whole of the issue was underwritten by Mahesh for
a commission of 4%. Sub-underwriting contract was arranged with Yogesh for 30% of the issue at
a commission of 2%. The public applied for 32,000 shares. Both Mahesh and Yogest fulfilled their
obligations Later on Mahesh sold 2,000 shares at 79.90 each and the market value on the date of
close of the year was 8.00.
Prepare Underwriting Account in the books of Mahesh assuming ? 5,500 for expenses.
Ans. Cost of Unsold Shares = 728,100 and Market Value = 28,800; Profit = * 700.
Firm Underwriting
X Company Limited issued 30,000 equity shares of 3 10 each. The whole issue was underwritten
by Y Company Limited at an agreed commission of 5% payable as to 75% in fully paid equity shares
V
non Limited also made a firm
Answers
Answer:
Bharat Chemicals Ltd. 50,000. Paid to Rama Swami
& Sons ? 16,000; Underwriters Liability Bharat Investment Co. Ltd. 4,000 shares and Rama
Swami & Sons 1,600 shares.
up
9. Bharat Investment Co. Ltd. agreed to underwrite 5,00,000 shares of Bharat Chemicals Ltd. for a
commission of 5%. The underwriters then entered into an arrangement with X, by which later
agreed to sub-underwrite ? 1,00,000 of the said 7 5,00,000 shares for a commission of 4%.
In course the prospectus of Bharat Chemicals Ltd. was published, offered the shares at par, but
public only applied for 80% thereof and accordingly the Underwriters were required to take up 20%.
At a later date Bharat Investment Co. Ltd. realised the shares they had been called upon to take
at a price of 97%. Prepare the necessary accounts showing the profit or loss earned by Bharat
Investment Co. Ltd. & also give journal entries.
Ans. Profit # 18,600; Underwriting Commission from Bharat Chemicals Ltd. ? 25,000 and Paid to
X*4,000; Underwriters Liability : Bharat Investment Company Ltd. shares of 1,00,000 and
X-shares of 20,000.
0. Ganesh Ltd. offered for subscription 40,000 equity shares of? 10 each payable as : 73 on application;
*4 on allotment and 3 on first and final call. Whole of the issue was underwritten by Mahesh for
a commission of 4%. Sub-underwriting contract was arranged with Yogesh for 30% of the issue at
a commission of 2%. The public applied for 32,000 shares. Both Mahesh and Yogest fulfilled their
obligations Later on Mahesh sold 2,000 shares at 79.90 each and the market value on the date of
close of the year was 8.00.
Prepare Underwriting Account in the books of Mahesh assuming ? 5,500 for expenses.
Ans. Cost of Unsold Shares = 728,100 and Market Value = 28,800; Profit = * 700.
Firm Underwriting
X Company Limited issued 30,000 equity shares of 3 10 each. The whole issue was underwritten
by Y Company Limited at an agreed commission of 5% payable as to 75% in fully paid equity shares
V
non Limited