X Limited Issued 10,000, 12% debentures of Rs. 100 each payable Rs. 40 on application and Rs. 60 on allotment. The public applied for 14,000 debentures. Applications for 9,000 debentures were accepted in full, applications for 2,000 debentures were allotted 1,000 debentures and the remaining applications, were rejected. All money was duly received. 12% Debenture Application A/c will be credited with -
X Limited Issued 10,000, 12% debentures of Rs. 100 each payable Rs. 40 on application and Rs. 60 on allotment. The public applied for 14,000 debentures. Applications for 9,000 debentures were accepted in full, applications for 2,000 debentures were allotted 1,000 debentures and the remaining applications, were rejected. All money was duly received. 12% Debenture Application A/c will be credited with -
Solution
Looking at the application details:
Applications received:
- 9,000 debentures - accepted in full
- 2,000 debentures - allotted 1,000 (partial allotment)
- Remaining applications - rejected
Total applications received = 9,000 + 2,000 + Remaining
Since total applications = 14,000
Remaining (rejected) = 14,000 - 9,000 - 2,000 = 3,000 debentures
12% Debenture Application A/c is credited when application money is received from all applicants, regardless of whether they will be allotted fully, partially, or rejected.
Application money per debenture = Rs. 40
Total application money received = Total applications × Application money per debenture
= 14,000 × Rs. 40
= Rs. 5,60,000
The Application Account is credited with the entire amount received from all applicants (14,000 debentures worth) at the application stage. The adjustments for rejection and excess application money on partial allotment are handled later through separate journal entries on the debit side of this account.
Answer: Option 2: Rs. 5,60,000
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