Question

Astha Cranky Ltd. purchased assets of the value of ₹ 3,60,000 from Anand Ltd. and made the payment of purchase consideration by issuing 11% Debentures of ₹ 100 each at a discount of 10%. The number of debentures issued by Astha Cranky Ltd. were

• A. 3,600.
• B. 36,000.
• C. 40,000.
• D. 4,000.

Hint:

Always remember to use the Issue Price (Face Value - Discount or Face Value + Premium) as the denominator, not the Face Value, when calculating the quantity of securities issued for a fixed consideration.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
When a company issues debentures for consideration other than cash (like for buying assets), the number of debentures to be issued is calculated by dividing the total purchase price by the issue price per debenture.
Step 2: Key Formula or Approach:
\[ \text{Number of Debentures} = \frac{\text{Purchase Consideration}}{\text{Issue Price per Debenture}} \]
\[ \text{Issue Price} = \text{Face Value} - \text{Discount} \text{ (or } + \text{Premium)} \]
Step 3: Detailed Explanation:
1. Identify given values:
- Purchase Consideration = 3,60,000.
- Face Value (FV) of one debenture = 100.
- Discount = 10% of Face Value = \( 100 \times 10% = 10 \).
2. Determine Issue Price:
- Issue Price = \( 100 - 10 = 90 \).
3. Calculate the quantity:
- Number of Debentures = \( \frac{3,60,000}{90} \).
- Number of Debentures = 4,000.
Step 4: Final Answer:
The company issued 4,000 debentures to settle the purchase of assets.
Therefore, the correct option is (d).