Multiple choice

A and B entered into a joint venture to underwrite 1,00,000 shares issued by X Company. The extent of underwriting was 80% of the total issue. Shares subscribed by public were 75,000. Calculate the net liability of underwriters.

  1. 5,000 shares

  2. 20,000 shares

  3. 40,000 shares

  4. 25,000 shares
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gross liability of the venturers = 1, 00, 000*80% = 80, 000 shares Shares underwritten by them = 75, 000*80% = 60,000 shares             Net liability = 80, 000 - 60, 000 = 20,000 shares Net liability can't be 80, 000 - 75, 000 = 5, 000 shares or 1, 00, 000 - 60, 000 = 40, 000 shares

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