CMA Intermediate · Corporate Accounting and Auditing · Underwriting of Securities
Tara Power Ltd offered 2,00,000 shares at ₹10 each with underwriting commission of 5% on issue price of shares underwritten. R underwrote 1,20,000 shares and S 80,000 shares. The company is fully underwritten. What is the total commission payable to R and S together?
Total commission is ₹1,00,000, computed as 5% of the issue price of all shares underwritten, 2,00,000 shares at ₹10 being ₹20,00,000. R receives ₹60,000 and S ₹40,000. Commission is on shares underwritten, not on shares taken up.
- A₹1,00,000Correct
- B₹60,000
- C₹50,000
- D₹1,20,000
Explanation
Total shares underwritten = 2,00,000 at ₹10 = ₹20,00,000. Commission at 5% = ₹1,00,000. R gets ₹60,000 and S ₹40,000. The ₹60,000 option is only R's share.
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