Calculating Debentures Issued at a Discount

This solution explains how to determine the number of debentures issued by G.S. Rai company Ltd. when purchasing assets, considering the debentures were issued at a discount.

Understanding the Problem

G.S. Rai company Ltd. acquired assets with a specific book value. The payment was made using debentures, but these debentures were not issued at their face value. Instead, they were sold at a discount. We need to find out how many debentures were actually given to the vendor.

• Book Value of Assets Purchased = Rs. 98,000
• Face Value per Debenture = Rs. 100
• Discount Rate on Debentures = 20%
• Purchase Consideration = Book Value of Assets = Rs. 98,000

Step-by-Step Calculation

To find the number of debentures issued, we first need to calculate the price at which each debenture was actually issued (the issue price), considering the discount.

1. Calculate the Discount Amount per Debenture:

The debentures were issued at a 20% discount on their face value.

• Discount Amount = Face Value per Debenture × Discount Rate
• Discount Amount = Rs. 100 × 20%
• Discount Amount = Rs. 100 × \frac{20}{100}
• Discount Amount = Rs. 20

2. Calculate the Issue Price per Debenture:

The issue price is the face value minus the discount amount.

• Issue Price = Face Value per Debenture - Discount Amount
• Issue Price = Rs. 100 - Rs. 20
• Issue Price = Rs. 80

So, G.S. Rai company Ltd. issued each debenture for Rs. 80.

3. Calculate the Number of Debentures Issued:

The total purchase consideration is paid by issuing these debentures at the calculated issue price.

• Number of Debentures = \frac{\text{Purchase Consideration}}{\text{Issue Price per Debenture}}
• Number of Debentures = \frac{\text{Rs.} 98,000}{\text{Rs.} 80}
• Number of Debentures = 1225

Conclusion

G.S. Rai company Ltd. issued 1225 debentures to the vendor. This number reflects the total purchase price divided by the actual amount received per debenture after accounting for the 20% discount.