Assignment Question

Q.1.
(Full underwriting, Surplus of one Underwriter Adjusted – Negative Adjustment) Chaitanya

Limited issues 40,000 shares. Issue is underwritten by A, B and C in the ratio of 5: 3: 2 respectively.
Unmarked applications totaled 2,000 whereas marked applications are as follows: A – 16,000; B – 5,700
and C – 8,300. Calculate the net liability of each one of the underwriters. Unmarked applications are to be
distributed amongst the underwriters in the ratio of their gross liability.
Computation of Liability of Underwriters

Particulars A (5) B (3) C (2) Total -10
Gross Liability 20,000 12,000 8,000 40,000
Less: Marked Application (Actual) -16,000 -5,700 -8,300 -30,000
Balance 4,000 6,300 -300 10,000
Less: Unmarked Application (GLR) (5:3:2) -1,000 -600 -400 -2,000
Balance 3,000 5,700 -700 8,000
Less: Negative Adjustment (5:3) -438 -263 700 0
Net Liability 2,563 5,438 0 8,000
Unmarked Application -2,000
A B C
5 3 2 10
2000X5/102,000X3/102,000X2/10
1,000 600 400
Q.2. (Partial, Surplus of 1 Underwriter Adjusted) Excel Limited issued 40,000 shares of 10
each. These shares were underwritten as follows: A - 20,000 shares; and B - 12,000 shares. The
public applied for 33,000 shares which included marked applications from the underwriters as
follows: A -5,000 shares; B - 3,000 shares. Direct applications received by the Company were for
5,000 shares. Determine the net liability of the underwriters. Unmarked applications are to be

Particulars A (5) B (3) Com (2) Total -10
Gross Liability 20,000 12,000 8,000 40,000
Balance 15,000 9,000 3,000 27,000
Less: Unmarked Application (GLR) (5:3:2) -10,000 -6,000 -4,000 -20,000
Balance 5,000 3,000 -1,000 7,000
Less: Negative Adjustment (5:3) -625 -375 1,000 0
Net Liability 4,375 2,625 0 7,000

A B C
5 3 2 10
20000X5/10 20,000X3/10 20,000X2/10
10,000 6,000 4000
Q.3. (Partial Underwriting) Priti Ltd. issued 20,000 equity shares of 20 each. The issue was
underwritten as follows: A 30%, B 25%, and C 30%. The company received a total number of
16,000 applications of which Marked applications were as follows: A: 3,600 shares, B 4,400 shares
and C: 5,500 shares. Determine the liability of each of the underwriters.
Particulars A (30%) B (25%) C (30%) Com. 15% Total -10
Gross Liability 6,000 5,000 6,000 3,000 20,000
Less: Marked Application (Actual) -3,600 -4,400 -5,500 0 -13,500
Balance 2,400 600 500 3,000 6,500
Less: Unmarked Application (GL Ratio) 0 0 0 -2,500 -2,500
Net Liability 2,400 600 500 500 4,000
Q.4. Gemini Ltd. came up with public issue of 30,00,000 Equity shares of Rs. 10 each at Rs. 15 per share.
A, B and C took underwriting of the issue in 3 : 2 : 1 ratio. Applications were received for 27,00,000 shares.
The marked applications were received as under:
A 8,00,000 shares B 7,00,000 shares C 6,00,000 shares
Commission payable to underwriters is at 5% on the face value of shares.
Compute the liability of each underwriter as regards the number of shares to be taken up.
Pass journal entries in the books of Gemini Ltd. to record the transactions relating to underwriters.

Gross Liability 1,500,000 1,000,000 500,000 3,000,000
Less: Marked Application (Actual) -800,000 -700,000 -600,000 -2,100,000
Balance 700,000 300,000 -100,000 900,000
Less: Unmarked Application (GLR) -300,000 -200,000 -100,000 -600,000
Balance 400,000 100,000 -200,000 300,000
Less: Negative Adjustment (3:2) -120,000 -80,000 200,000 0
Net Liability 280,000 20,000 0 300,000
A B C
3 2 1 6
Computation of Underwriters Commission

Particulars A (3) B (2) C (1)
Gross liability (Given) 1500000 1000000 500000
(X Face Value of Share - if given) 10 10 10
Total Face Value of Shares 15000000 10000000 5000000
(A) Commission Due (Total Face Value X Rate of 750000 500000 250000
Commission)
(B) Share Purchased By Underwriters -4200000 -300000 0
(Net Liability X Issue Price of Share per share)
Amount Paid by Company to Underwriter (+) /
-3450000 200000 250000
Amount received by Company From Underwriter (-)
Received Paid Paid
(A- B)
Q.5. (Full Underwriting, No Credit for Firm underwriting) Export Ltd. which is registered in
Ahmedabad issued a prospectus for inviting applications for 5,00,000 equity shares of Rs. 10 each. The
underwriters have underwritten the entire issue as follows:
A: 2,00,000 shares B: 1,50,000 shares C: 1,00,000 shares D : 50,000 shares
Besides, they have agreed for firm underwriting as below:
A : 20,000 shares B : 10,000 shares C : 6,000 shares D : 4,000 shares
The company received applications for 4,50,000 shares including firm underwriting. These applications
Q.5. (Full Underwriting, No Credit for Firm underwriting) Export Ltd. which is registered in
Ahmedabad issued a prospectus for inviting applications for 5,00,000 equity shares of Rs. 10 each. The
underwriters have underwritten the entire issue as follows:
A: 2,00,000 shares B: 1,50,000 shares C: 1,00,000 shares D : 50,000 shares
Besides, they have agreed for firm underwriting as below:
A : 20,000 shares B : 10,000 shares C : 6,000 shares D : 4,000 shares
The company received applications for 4,50,000 shares including firm underwriting. These applications
include marked applications including firm underwriting as follows:
A : 2,20,000 shares B : 90,000 shares C : 1,00,000 shares D : 10,000 shares Assuming that no credit for
firm underwriting is to be given to underwriters. Determine the liabilities of underwriters.

Particulars A (4) B (3) C (2) D (1) Total -10
Gross liability (Given) 200,000 150,000 100,000 50,000 500,000
Less: Marked Application (Actual is to be taken) -200,000 -80,000 -94,000 -6,000 -380,000
Balance 0 70,000 6,000 44,000 120,000
Less: Unmarked Application (GLR) -12000 -9000 -6000 -3000 -30,000
Balance -12,000 61,000 0 41,000 90,000
Less: Firm underwriting (IMP) -16,000 -12,000 -8,000 -4,000 -40,000
(Gross Liability Ratio)
Balance -28,000 49,000 -8,000 37,000 50,000
Less: Negative Adjustment (3:1=4) 28000 -27000 8000 -9000 0
(Balance gross liability ratio)
Balance 0 22000 0 28000 50000
Add: Firm Underwriting
(Actual / Individual Ratio) -IMP 20000 10000 6000 4000 40000
Net Liability 20,000 32,000 6,000 32,000 90,000
A B C D Total
Marked App.(Including Firm Underwriting) 220,000 90,000 100,000 10,000 420,000
Less:Firm Underwriting -20,000 -10,000 -6,000 -4,000 -40,000
Marked app. (Net) 200,000 80,000 94,000 6,000 380,000
Total Application 450,000 Unmarked Application -30,000

Less: Marked Application (Net) -380,000 A B C D
Less:Firm Underwriting -40,000 4 3 2 1
Unmarked Application 30,000
Q.6. (Firm underwriting benefit given) Prepare a statement of underwriters liability when Skill Ltd.
makes public issue of 45,000 shares which are underwritten by Ali, Bali, and Charlie equally. Marked
Applications Received :- Ali 12,000 Bali 13,000 Charlie 7,000. Unmarked Applications Received 6,000.
Firm underwriting is 1,500 shares each. Calculate net liability and total liability

Particulars Ali (1) Bali (1) Charli (1) Total -3
Gross liability (Given) 15,000 15,000 15,000 45,000
Less: Marked Application (Actual is to be taken) -12,000 -13,000 -7,000 -32,000
Balance 3,000 2,000 8,000 13,000
Less: Unmarked Application (Gross Liability Ratio)-2,000 -2,000 -2,000 -6,000
Balance 1,000 0 6,000 7,000
Less: Firm underwriting (IMP) -1,500 -1,500 -1,500 -4,500
(Actual / Individual Ratio)
Balance -500 -1,500 4,500 2,500
Less: Negative Adjustment 500 1500 -2000 0
(Balance gross liability ratio)
Balance 0 0 2500 2500
(Actual / Individual Ratio) -IMP 1500 1500 1500 4500
Net Liability 1,500 1,500 4,000 7,000
Q.7. (Liability of Underwriters) Ganapati Ltd., issued 1,00,000 Equity Shares of Rs. 10 each at par. The
entire issue was underwritten as follows:
A : 60,000 Shares (Firm Underwriting 8,000 Shares)
B : 30,000 Shares (Firm Underwriting 10,000 Shares)
C : 10,000 Shares (Firm Underwriting 2,000 Shares)
The Total Applications including Firm Underwriting were for 80,000 Shares. The Marked Applications
were as follows: A : 20,000 Shares B : 14,000 Shares C : 6,000 Shares
The underwriting contract provides that credit for Unmarked Applications be given to the Underwriters in
proportion to the Shares underwritten. Determine the Liability of each Underwriter.
[Ans. A: 28,000; B: 10,000; C: 2,000

Balance 40,000 16,000 4,000 60,000
Balance 28,000 10,000 2,000 40,000
Balance 20,000 0 0 20,000
Net Liability 28,000 10,000 2,000 40,000
Total Application 80,000

Less: Marked Application (Net) -40,000
Less:Firm Underwriting (8000+10000+2000) -20,000
Q.8. (Firm Underwriting – Journal Entries) A company made a public issue of 3,18,750 equity shares of
Rs. 100 each. Rs. 50 payable on application and balance on allotment. The issue was underwritten by your
parties, Lilly, Silly, Billy and Mili in the proportion of 30%, 25% 20% and 25% respectively. Commission
is payable at 5% on the shares underwritten. They also agree for firm underwriting of 10,200, 15,300, Nil
and 38,250 shares respectively. In total subscription, excluding firm underwriting including marked
application were of 2,29,500 shares. Marked
application were as under: Lilly 61,200 Silly 51,000 Billy 30,600 Mili 61,200 .
Q.8. (Firm Underwriting – Journal Entries) A company made a public issue of 3,18,750 equity shares of
Rs. 100 each. Rs. 50 payable on application and balance on allotment. The issue was underwritten by your
parties, Lilly, Silly, Billy and Mili in the proportion of 30%, 25% 20% and 25% respectively. Commission
is payable at 5% on the shares underwritten. They also agree for firm underwriting of 10,200, 15,300, Nil
and 38,250 shares respectively. In total subscription, excluding firm underwriting including marked
application were of 2,29,500 shares. Marked
application were as under: Lilly 61,200 Silly 51,000 Billy 30,600 Mili 61,200 .
Ascertain the liability of individual underwriter and also show the journal entries that you would make is the
books of the company. All works should form part of your answer. Follow both method.
[Ans. Total liability: Lilly – 15,300, Silly – 15,300, Billy – 20,400, Mili – 38,250 Net liability: Lilly –
5,100; Billy – 20,400]

Particulars Lilly 30% Silly 25% Billy 20% Milly 25% Total -100%
Balance 34,425 28,688 33,150 18,488 114,750
Less: Unmarked Application (GLR) -7,650 -6,375 -5,100 -6,375 -25,500
Balance 26,775 22,313 28,050 12,113 89,250
Less: Firm underwriting (IMP) -10,200 -15,300 0 -38,250 -63,750
Balance 16,575 7,013 28,050 -26,138 25,500
Less: Negative Adjustment
(Balance gross liability ratio) -10,455 -8,713 -6,970 26,138 0
Balance 6,120 -1,700 21,080 0 25,500
(Balance gross liability ratio) -1,020 1,700 -680 0 0
Balance 5,100 0 20,400 0 25,500
Net Liability 15,300 15,300 20,400 38,250 89,250

Particulars Lilly 30% Silly 25% Billy 20% Milly 25%
Gross liability (Given) 95625 79688 63750 79,688
(X Issue price of Share - ) (100+50) 150 150 150 150
Total Issue Value of Shares 14343750 11953200 9562500 11953200
(A) Commission Due (Total Issue Value X Rate of 717187.5 597660 478125 597660
Commission)
(B) Share Purchased By Underwriters -2295000 -2295000 -3060000 -5737500
-1577812.5-1697340 -2581875 -5139840
Received Received Received Received
(A- B)
Particulars Lilly 30% Silly 25% Billy 20% Milly 25% Total -100%
Balance 34,425 28,688 33,150 18,488 114,750
Balance 26,775 22,313 28,050 12,113 89,250
Balance 7,650 6,375 15,300 -3,825 25,500
Balance 6,120 5,100 14,280 0 25,500
Net Liability 16,320 20,400 14,280 38,250 89,250
Particulars Lilly 30% Silly 25% Billy 20% Milly 25%
(X Issue price of Share - ) (100+50) 150 150 150 150
(A) Commission Due (Total Issue Value X Rate of 717187.5 597660 478125 597660
Commission)
-1730812.5-2462340 -1663875 -5139840
(A- B)

Q.9. (Firm Underwriting – Benefit Given / Not Given) Madhavi Ltd. issued 10,000 shares of Rs. 10 each.
These shares are underwritten as Nitu – 6,000, Mitu – 2,500 and Anand – 1,500. In additional to this there
was firm underwriting as Nitu – 800, Mitu – 300 and Anand – 1,000 shares. The total subscription received
including firm underwriting and marked applications are 7,500 shares. The Marked applications excluding
firm underwriting are Nitu – 1,000, Mitu – 2,000 and Anand – 500 shares. You are required to show
statement of liability of underwriters in both cases if credit of firm underwriting is to be given and not to be
given. [Ans. Liability : Benefit Given : Nitu : 3,300; Mitu : 300; Anand : 1,000 Benefit not given : Nitu
: 3,000; Mitu : 300; Anand : 1,300]

Particulars Nitu-12 Mitu-5 Anand-3 Total -20
Less: Marked Application (Actual is to be taken) -1,000 -2,000 -500 -3,500
Balance 5,000 500 1,000 6,500
Less: Unmarked Application (GLR) -1,140 -475 -285 -1,900
Balance 3,860 25 715 4,600
Less: Firm underwriting (IMP) -800 -300 -1,000 -2,100
Balance 3,060 -275 -285 2,500
(Balance gross liability ratio) -560 275 285 0
Balance 2,500 0 0 2,500
Net Liability 3,300 300 1,000 4,600

Balance 5,000 500 1,000 6,500
Less: Unmarked Application (GLR) -1,140 -475 -285 -1,900
Balance 3,860 25 715 4,600
Less: Firm underwriting (IMP) -1,260 -525 -315 -2,100
Balance 2,600 -500 400 2,500
(Balance gross liability ratio) -400 500 -100 0
Balance 2,200 0 300 2,500
Net Liability 3,000 300 1,300 4,600

Less: Firm Underwriting -2100
Q.10. (Entire Issue Underwritten) Shirke Company made a public issue of 1,25,000 equity shares of Rs.
100 each, fully payable on application. The entire issue was underwritten by four parties – P, Q, R and S in
the proportion of 30%, 25%, 25% and 20% respectively. The underwriting commission was 2%. P, Q, R
and S had also agreed on “Firm” Underwriting of 4,000, 6,000, Nil and 15,000 shares respectively. The total
subscriptions, excluding firm Underwriting, including Marked Applications were for 90,000 shares. Marked
application received were as under: P – 24,000 shares; Q – 20,000; R – 12,000 and S – 24,000 shares.
1. Ascertain the liability of the individual Underwriters assuming:
a) When Benefit of Firm Underwriting is GIVEN to Underwriters.
b) When benefit of firm underwriting is NOT GIVEN to Underwriters.
2. Show the Journal Entries that you would make in the books of the company. All workings should form
part of your answer.

Particulars P -30% Q-25% R-25% S-20% Total -100%
Balance 13,500 11,250 19,250 1,000 45,000
Balance 10,500 8,750 16,750 -1,000 35,000
Less: Firm underwriting (IMP) -4,000 -6,000 0 -15,000 -25,000
Balance 6,500 2,750 16,750 -16,000 10,000
Balance 500 -2,250 11,750 0 10,000
(Balance gross liability ratio) -1,227 2,250 -1,023 0 0
Balance -727 0 10,727 0 10,000
(Balance gross liability ratio) 727 -727
Balance 0 0 10,000 0 10,000
Net Liability 4,000 6,000 10,000 15,000 35,000

Particulars P -30% Q-25% R-25% S-20%
(X Issue price of Share - ) (100) 100 100 100 100
(A) Commission Due (Total Issue Value X Rate of 75000 62500 62500 50000
Commission)
-325000 -537500 -937500 -1450000
(A- B)

Particulars P -30% Q-25% R-25% S-20% Total -100%
Balance 13,500 11,250 19,250 1,000 45,000
Balance 10,500 8,750 16,750 -1,000 35,000
Balance 3,000 2,500 10,500 -6,000 10,000
Balance 750 625 8,625 0 10,000
(Actual / Individual Ratio) -IMP
Net Liability 4,750 6,625 8,625 15,000 35,000

Particulars P -30% Q-25% R-25% S-20%
(X Issue price of Share - ) (100) 100 100 100 100
(A) Commission Due (Total Issue Value X Rate of 75000 62500 62500 50000
Commission)
-400000 -600000 -800000 -1450000
(A- B)
Q.11. (Entire Issue Underwritten, Journal Entries)
Samson Ltd. issued 90,000 shares of Rs. 10 each. Following three underwriters have taken responsibility as
under: Paresh : 45,000 shares, Parag : 30,000 shares. Pravin 15,000 shares.
They have also agreed for firm undertaking for following shares:
Paresh : 7,500 shares, Parag : 4,500 shares, Pravin 4,500 shares
The company received applications for 60,000 shares which does not include firm underwriting. Out of
these, marked application were as under for 45,000 shares.
Paresh: 18,000 shares, Parag: 15,000 shares, Pravin 12,000 hares.
1. Fix the liability of each underwriter. No credit is given for firm underwriting.
2. Give journal entries in the books of Samson Ltd.
3. 5% Commission is to be paid to underwriters.

Particulars Paresh-3 Parag-2 Pravin-1 Total -6
Balance 27,000 15,000 3,000 45,000
Balance 19,500 10,000 500 30,000
Balance 11,250 4,500 -2,250 13,500
(Balance gross liability ratio) -1,350 -900 2,250 0
Balance 9,900 3,600 0 13,500
Net Liability 17,400 8,100 4,500 30,000
Particulars P -30% Q-25% R-25%
Gross liability (Given) 45,000 30,000 15,000
(X Issue price of Share - ) (100) 10 10 10
Total Issue Value of Shares 450000 300000 150000
(A) Commission Due (Total Issue Value X Rate of 22500 15000 7500
Commission)
(B) Share Purchased By Underwriters -174000 -81000 -45000
-151500 -66000 -37500
Received Received Received
(A- B)
Q.12. (Full Underwriting) Kiran Limited issued 10,000 shares of Rs. 10 each. These shares were
underwritten as follows: A : 6,000 shares, B : 2,500 shares, C : 1,500 shares. IN addition to the above firm
underwritten as follows : A : 800 shares, B : 300 shares, C : 1,000 shares.
Total subscriptions received by the company including firm underwriting and marked applications)
were 7,100 shares. The applications were marked as follows: A : 1,000 shares, B : 2,000 shares, C : 500
shares. You are required to determine the liability of underwriters.
A. If underwriters were not given any credit for firm underwriting.
B. If underwriters were given credit for firm underwriting.

Particulars A-12 B-5 C-3 Total -20
Balance 5,000 500 1,000 6,500
Less: Unmarked Application (GLR) -900 -375 -225 -1,500
Balance 4,100 125 775 5,000
Less: Firm underwriting (IMP) -800 -300 -1,000 -2,100
Balance 3,300 -175 -225 2,900
(Balance gross liability ratio) -400 175 225 0
Balance 2,900 0 0 2,900
Net Liability 3,700 300 1,000 5,000

Balance 5,000 500 1,000 6,500
Less: Unmarked Application (GLR) -900 -375 -225 -1,500
Balance 4,100 125 775 5,000
Less: Firm underwriting (IMP) -1,260 -525 -315 -2,100
Balance 2,840 -400 460 2,900
(Balance gross liability ratio) -320 400 -80 0
Balance 2,520 0 380 2,900
Net Liability 3,320 300 1,380 5,000

Less: Firm Underwriting -2100
Q.2. (Partial, Surplus of 1 Underwriter Adjusted) Excel Limited issued 40,000 shares of 10
each. These shares were underwritten as follows: A - 20,000 shares; and B - 12,000 shares. The
public applied for 33,000 shares which included marked applications from the underwriters as
follows: A -5,000 shares; B - 3,000 shares. Direct applications received by the Company were for
5,000 shares. Determine the net liability of the underwriters. Unmarked applications are to be
Unmarked Application in Ratio of Gross Liability

Particulars A (5) B (3) Com (2) Total -10
Gross Liability 20,000 12,000 8,000 40,000
Balance 15,000 9,000 3,000 27,000
Less: Unmarked Application (GL Ratio) (5:3:2) -10,000 -6,000 -4,000 -20,000
Balance 5,000 3,000 -1,000 7,000
Less: Negative Adjustment (5:3) 625 375 1,000 0
Net Liability 5,625 3,375 0 9,000

A B C
5 3 2 10
20000X5/10 20,000X3/10 20,000X2/10
10,000 6,000 4000

Q.3. (Partial Underwriting) Priti Ltd. issued 20,000 equity shares of 20 each. The issue was
underwritten as follows: A 30%, B 25%, and C 30%. The company received a total number of
16,000 applications of which Marked applications were as follows: A: 3,600 shares, B 4,400
shares and C: 5,500 shares. Determine the liability of each of the underwriters.
Unmarked Application in Ratio of Gross Liability

Particulars A (30%) B (25%) C (30%) Com. 15% Total -10
Gross Liability 6,000 5,000 6,000 3,000 20,000
Less: Marked Application (Actual) -3,600 -4,400 -5,500 0 -13,500
Balance 2,400 600 500 3,000 6,500
Less: Unmarked Application (GL Ratio) 0 0 0 -2,500 -2,500
Net Liability 2,400 600 500 500 4,000

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Q.1.

(Full underwriting, Surplus of one Underwriter Adjusted – Negative Adjustment) Chaitanya

Computation of Liability of Underwriters

Computation of Liability of Underwriters

Unmarked Application -20,000

Computation of Liability of Underwriters

Computation of Underwriters Commission

Computation of Liability of Underwriters

Total Application 450,000 Unmarked Application -30,000

Computation of Liability of Underwriters

Computation of Liability of Underwriters

Total Application 80,000

Computation of Liability of Underwriters

Computation of Underwriters Commission

Total Application 229,500

Computation of Liability of Underwriters

Computation of Liability of Underwriters

Total Application 7,500

Computation of Liability of Underwriters

Computation of Underwriters Commission

Computation of Liability of Underwriters

Computation of Underwriters Commission

Computation of Liability of Underwriters

Computation of Liability of Underwriters

Computation of Liability of Underwriters

Total Application 7,100

Unmarked Application in Ratio of Gross Liability

Unmarked Application -20,000

10,000 6,000 4000

Unmarked Application in Ratio of Gross Liability

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