A Ltd. purchased machinery for a book value of ₹4,00,000. The consideration was paid by issue of 10% Debentures of ₹100 each at a discount of 20%. The Debenture Account will be credited by what amount?

₹5,00,000

The correct answer is option 4- ₹5,00,000.

When debentures are issued at a discount, the entry will be
Vendors Dr.                                          4,00,000
Discount on Issue of Debenture A/c Dr.   1,00,000 (5,000 x 20)
      To Debentures A/c                                           5,00,000 (5,000 x 100)

Thus, debenture account is credited with ₹5,00,000.

Total value to be given to vendor = 4,00,000
Debenture face value = 100 - 20% discount
                               = 100 - 20
                               = 80

Total no of debentures issued = 4,00,000/80
                                           = 5,000