Read the following passage and answer the questions

On January 1, 2024, the Director of X Ltd. issued for public subscription 50,000 equity shares of Rs. 10 each at Rs. 12 per share payable, Rs. 5 on application (including premium), Rs. 4 on allotment and the balance on call on May 01, 2024. The issue was closed on February 10, 2024 by which date applications for 70,000 shares were received.

Of the cash received Rs. 40,000 was returned and Rs.60,000 was applied to the amount due on allotment, the balance of which was paid on February 16, 2024. All the shareholders paid the call due on May 01, 2024 with the exception of an allottee of 500 shares. These shares were forfeited on September 29, 2024 and reissued as fully paid at Rs. 8 per share on November 01, 2024. The company, as a matter of policy, does not maintain a calls-in-arrears account.

Q) What amount will be credited to Equity Share Application Account on February 10, 2024?

The correct option is Rs. 3,50,000.

Step-by-step Explanation:

When a company invites subscriptions from the public, the amount received along with the application forms is credited to the Share Application Account. To find the amount credited on February 10, 2024 (the date the issue closed and applications were received), we follow these steps:

1. Identify the number of shares applied for:
According to the passage, applications were received for 70,000 shares by the closing date.

2. Identify the application rate per share:
The amount payable on application is Rs. 5 per share (which includes the premium amount).

3. Calculate the total application money received:
$\text{Total Application Money}=\text{Number of Shares Applied}\times \text{Application Rate per Share}$
Substituting the given values:
$\text{Total Application Money}=\mathrm{70,000}\times \text{Rs. }5=\text{Rs. }\mathrm{3,50,000}$

4. Accounting entry:
Upon receiving the application money, the bank account is debited and the Equity Share Application Account is credited as follows:

Bank A/c Dr. Rs. 3,50,000
    To Equity Share Application A/c Rs. 3,50,000

Therefore, the total amount credited to the Equity Share Application Account on February 10, 2024, is Rs. 3,50,000.