Question

A company purchased machinery worth ₹5,00,000 and issued 12% debentures of ₹100 each at par to the vendor. How many debentures were issued?

• A. 4,000
• B. 5,000
• C. 6,000
• D. 50,000

Hint:

If debentures were issued at a premium, the issue price in the denominator would be (Face Value + Premium). If at a discount, it would be (Face Value - Discount).

Answer 1

The Correct Option is B

Step 1: Understanding the Question:
We need to calculate the number of debentures required to settle a specific purchase consideration when issued at par.

Step 2: Key Formula or Approach:
\[ \text{Number of Debentures} = \frac{\text{Purchase Consideration}}{\text{Issue Price per Debenture}} \]

Step 3: Detailed Explanation:
1. Purchase consideration (value of machinery) = ₹5,00,000.
2. Face value of each debenture = ₹100.
3. Since they are issued "at par", the issue price is also ₹100.
4. Number of debentures = \( \frac{5,00,000}{100} = 5,000 \).

Step 4: Final Answer:
The company issued 5,000 debentures.