Question:
Hira Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each at a premium of 10%. The whole amount was payable with application. Applications were received for 4,00,000 equity shares. The company decided to allot the shares on pro-rata basis to all the applicants. The amount refunded by the company was:
Hira Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each at a premium of 10%. The whole amount was payable with application. Applications were received for 4,00,000 equity shares. The company decided to allot the shares on pro-rata basis to all the applicants. The amount refunded by the company was:
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Issue price is Rs. 11 and half of the applications are rejected, so the refund is 2,00,000 x Rs. 11.
Updated On: Oct 26, 2026
- Rs 22,00,000
- Rs 20,00,000
- Rs 24,00,000
- Nil
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The Correct Option is A
Solution and Explanation
Step 1: Find the issue price:
Face value Rs. 10, premium 10 percent = Rs. 1. Issue price = Rs. 11 per share.
The whole Rs. 11 is payable with the application.
Step 2: Money received:
Applications received for 4,00,000 shares, each with Rs. 11.
Money received = 4,00,000 x Rs. 11 = Rs. 44,00,000.
Step 3: Money needed and refund:
Shares offered = 2,00,000. Money needed = 2,00,000 x Rs. 11 = Rs. 22,00,000.
Refund = Rs. 44,00,000 - Rs. 22,00,000 = Rs. 22,00,000.
The allotment is pro rata at 1 share for every 2 applied.
Step 4: Check every option:
(A) Rs 22,00,000 is CORRECT. Money received = 4,00,000 x Rs. 11 = Rs. 44,00,000. Money kept = 2,00,000 x Rs. 11 = Rs. 22,00,000. Refund = Rs. 22,00,000.
(B) Rs 20,00,000 is wrong. Rs. 20,00,000 is 2,00,000 x Rs. 10. It leaves out the premium of Rs. 1 per share.
(C) Rs 24,00,000 is wrong. Rs. 24,00,000 does not come out of any correct step. It would need Rs. 12 per share.
(D) Nil is wrong. Nil is wrong. Only 2,00,000 shares are available against 4,00,000 applied for, so half of the money must be returned.
Final Answer:
The amount refunded is Rs. 22,00,000, option (A).
Face value Rs. 10, premium 10 percent = Rs. 1. Issue price = Rs. 11 per share.
The whole Rs. 11 is payable with the application.
Step 2: Money received:
Applications received for 4,00,000 shares, each with Rs. 11.
Money received = 4,00,000 x Rs. 11 = Rs. 44,00,000.
Step 3: Money needed and refund:
Shares offered = 2,00,000. Money needed = 2,00,000 x Rs. 11 = Rs. 22,00,000.
Refund = Rs. 44,00,000 - Rs. 22,00,000 = Rs. 22,00,000.
The allotment is pro rata at 1 share for every 2 applied.
Step 4: Check every option:
(A) Rs 22,00,000 is CORRECT. Money received = 4,00,000 x Rs. 11 = Rs. 44,00,000. Money kept = 2,00,000 x Rs. 11 = Rs. 22,00,000. Refund = Rs. 22,00,000.
(B) Rs 20,00,000 is wrong. Rs. 20,00,000 is 2,00,000 x Rs. 10. It leaves out the premium of Rs. 1 per share.
(C) Rs 24,00,000 is wrong. Rs. 24,00,000 does not come out of any correct step. It would need Rs. 12 per share.
(D) Nil is wrong. Nil is wrong. Only 2,00,000 shares are available against 4,00,000 applied for, so half of the money must be returned.
Final Answer:
The amount refunded is Rs. 22,00,000, option (A).
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