CMA Intermediate · Corporate Accounting and Auditing · Underwriting of Securities
Nila Pharma Ltd issued 1,00,000 equity shares of ₹10 each at a premium of ₹5. Only 80% of the issue was underwritten, at a commission of 4% on the issue price of the shares underwritten. What is the total underwriting commission payable?
The commission payable is ₹48,000. Only 80,000 shares were underwritten, and commission is charged on the issue price of ₹15 including the premium, not the face value. So 80,000 x ₹15 x 4% equals ₹48,000.
- A₹60,000
- B₹48,000Correct
- C₹32,000
- D₹40,000
Explanation
Shares underwritten = 80,000. Issue price = 10 + 5 = ₹15. Commission = 80,000 x 15 x 4% = ₹48,000. Charging it on the whole issue gives ₹60,000, and charging it on face value gives ₹32,000. Both use the wrong base.
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