X Ltd. purchased assets of ₹6,30,000 from Y Ltd. X Ltd. issued 9% Debentures of ₹100 each full paid in consideration. Calculate number of Debentures to be issued if debentures are issued at 20% premium.

5,250

The correct answer is Option (2) - 5,250

Assets purchased = ₹630000
9% Debentures of ₹100 each at premium of 20% i.e. ₹20

Debentures issued = Purchase consideration/issue price
                           = 630000/ (100+20)
                           = 630000/120
                           = 5250

Journal entry for recording this-

Y Ltd. Dr.                                 ₹630000
     To Debentures A/c                            ₹ 525000
     To Securities Premium Reserve A/c    ₹105000