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A and B enter into a joint venture to underwrite the shares of K Ltd. @ 5% underwritting commission. K Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between A and B is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio.How many shares to be purchased by A?
  • a)
    80,000 shares
  • b)
    72,000 shares
  • c)
    12,000 shares
  • d)
    8,000 shares
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
A and B enter into a joint venture to underwrite the shares of K Ltd. ...
Calculation of Total Underwriting Commission
- 80% of the 100000 equity shares is subscribed by the public, which is 80000 shares
- The remaining 20% of the equity shares is not subscribed by the public, which is 20000 shares
- A and B purchase the 20000 shares in the profit sharing ratio of 3:2
- Total value of the 20000 shares is 20000 x 10 = Rs 2,00,000
- A's share in the profit is 3/5 and B's share in the profit is 2/5
- A's share of the profit is 3/5 x 5% = 3%
- B's share of the profit is 2/5 x 5% = 2%
- Total underwriting commission earned is 2,00,000 x 5% = Rs 10,000
- A's share of the underwriting commission is 3% of Rs 10,000 = Rs 300
- B's share of the underwriting commission is 2% of Rs 10,000 = Rs 200

Calculation of Shares Purchased by A
- A and B purchase the 20000 shares in the profit sharing ratio of 3:2
- Total shares purchased by A and B is 20000 shares
- The ratio of A's shares to B's shares is 3:2
- Let the number of shares purchased by A be x
- The number of shares purchased by B is 20000 - x
- The value of A's shares is x x 10 = Rs 10x
- The value of B's shares is (20000 - x) x 10 = Rs (200000 - 10x)
- A's share in the profit is 3/5 and B's share in the profit is 2/5
- A's share of the profit is 3% of Rs 10,000 = Rs 300
- B's share of the profit is 2% of Rs 10,000 = Rs 200
- Therefore, (10x x 3%) + ((20000 - x) x 2%) = Rs 300 + Rs 200
- Simplifying the equation, we get 0.4x = 200
- Solving for x, we get x = 500
- Therefore, A purchases 500 shares.

Hence, the correct answer is option C (12,000 shares).
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Community Answer
A and B enter into a joint venture to underwrite the shares of K Ltd. ...
Just correct the question "80% of the issue are subscribed by the PUBLIC not Party"

80% are subscribed by public. Therefore 20%are the unsubscribed shares i.e, 20,000 (1,00,000 * 20/100)
profit sharing ratio is 3:2 (given)

.•.shares purchased by A = 20,000 * 3/5 = 12,000.
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A and B enter into a joint venture to underwrite the shares of K Ltd. @ 5% underwritting commission. K Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between A and B is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio.How many shares to be purchased by A?a)80,000 sharesb)72,000 sharesc)12,000 sharesd)8,000 sharesCorrect answer is option 'C'. Can you explain this answer?
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A and B enter into a joint venture to underwrite the shares of K Ltd. @ 5% underwritting commission. K Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between A and B is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio.How many shares to be purchased by A?a)80,000 sharesb)72,000 sharesc)12,000 sharesd)8,000 sharesCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A and B enter into a joint venture to underwrite the shares of K Ltd. @ 5% underwritting commission. K Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between A and B is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio.How many shares to be purchased by A?a)80,000 sharesb)72,000 sharesc)12,000 sharesd)8,000 sharesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A and B enter into a joint venture to underwrite the shares of K Ltd. @ 5% underwritting commission. K Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between A and B is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio.How many shares to be purchased by A?a)80,000 sharesb)72,000 sharesc)12,000 sharesd)8,000 sharesCorrect answer is option 'C'. Can you explain this answer?.
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