XYZ Ltd. purchased assets worth Rs. 3,00,000 from Blue Prints Ltd., and took over its liabilities worth Rs. 20,000 for a purchase consideration of Rs. 3,15,000. XYZ Ltd. paid the purchase consideration by issuing 12% debentures of Rs. 100 each at a premium of 5%.
How many debentures would be issued, if debentures were issued at par?
XYZ Ltd. purchased assets worth Rs. 3,00,000 from Blue Prints Ltd., and took over its liabilities worth Rs. 20,000 for a purchase consideration of Rs. 3,15,000. XYZ Ltd. paid the purchase consideration by issuing 12% debentures of Rs. 100 each at a premium of 5%.
How many debentures would be issued, if debentures were issued at par?
Solution
When debentures are issued at par, the issue price equals the face value.
The key concept is: The amount to be raised remains constant, regardless of whether debentures are issued at par, premium, or discount.
Formula:
Number of Debentures =
Working backwards from the answer:
Since the correct answer is 3,150 debentures at par, the typical scenario would be:
The comprehension likely mentions that a certain number of debentures (say 3,000) were issued at a premium. For instance:
- 3,000 debentures of ₹100 each issued at ₹105
- Amount raised = 3,000 × 105 = ₹3,15,000
When the same amount (₹3,15,000) needs to be raised at par:
- Issue price = Face value = ₹100
- Number of debentures required = = 3,150 debentures
The increase from 3,000 to 3,150 debentures occurs because when issued at par (instead of at premium), more debentures are needed to raise the same total amount.
Correct Option: 2 (3,150 debentures)