ABC Ltd was registered as a corporation on 1 July 2014. On 4 July 2014, ABC Ltd issued a prospectus offering 100 000 ordinary shares at an issue price of $2.50 each, payable $1.50 on application and $1.00 on allotment.
Application closed on 1 August 2014 with the company having received applications for 110 000 shares. The shares were allotted on 15 August 2014, with the over-subscription amount being refunded to unsuccessful applicants. All allotment monies were received by 31 August 2014. Following the allotment the balance in the Share Capital account would be:

Question

Quizplus · Accepted Answer

The total value of shares offered in the prospectus is 100,000 x $2.50 = $250,000. As applications were received for 110,000 shares, the company received $165,000 (110,000 x $1.50) on application. On allotment, $100,000 (100,000 x $1.00) was received. Therefore, the total amount received from the issue of shares is $265,000 ($165,000 + $100,000).

The amount in the Share Capital account is the total value of shares issued, which is $250,000, minus any share issue expenses. As no share issue expenses are given in the question, the balance in the Share Capital account is $250,000.

Therefore, the correct answer is B. $250,000 Cr.

ABC Ltd Was Registered as a Corporation on 1 July