Question

Bishan Ltd. acquired assets worth Rs 12,60,000 and took over liabilities of Rs 2,40,000 of Nimi Ltd. for a purchase consideration of Rs 9,40,000. Bishan Ltd. issued 12% debentures of Rs 100 each at a discount of 6% in favour of Nimi Ltd. for payment of purchase consideration. The number of debentures issued were:

• A. 12,600
• B. 9,400
• C. 9,600
• D. 10,000

Hint:

Issue price is Rs. 94. Debentures issued = purchase consideration 9,40,000 / 94 = 10,000.

Answer 1

The Correct Option is D

Step 1: Note the purchase consideration:
Assets Rs. 12,60,000 less liabilities Rs. 2,40,000 gives net assets of Rs. 10,20,000.
But the purchase consideration agreed is only Rs. 9,40,000. This is the amount to be paid in debentures. The gap is a capital reserve and does not change the number of debentures.

Step 2: Find the issue price:
Face value = Rs. 100. Discount = 6%, which is Rs. 6.
Issue price = 100 - 6 = Rs. 94 per debenture.

Step 3: Find the number:
Number = 9,40,000 / 94 = 10,000 debentures.
Check: 10,000 x 94 = Rs. 9,40,000. Face value = Rs. 10,00,000 and discount = Rs. 60,000.

Step 4: Why the other options are wrong:
(A) 12,600 is 12,60,000 / 100. It uses the value of assets in place of the consideration.
(B) 9,400 is 9,40,000 / 100. It ignores the discount and uses the face value.
(C) 9,600 does not come from any correct working.

Final Answer:
10,000 debentures were issued, option (D).