The number of debentures to be issued to the vendor against purchase…

The correct answer is Option (3) → Number of debentures to be issued= Amount Payable / Issue Price

When a company buys an asset and pays the vendor in debentures, it issues debentures worth the amount payable to him (the purchase consideration). Each debenture is handed over at its issue price, the face value plus any premium or less any discount.

• For example, amount payable to the vendor = Rs. 1,05,000

• Debentures of Rs. 100 issued at a premium of 5%: issue price = Rs. 105

• Number of debentures = 1,05,000 / 105 = 1,000

Why the other options are incorrect

• Option (1) Amount Payable / Face value — Incorrect. It gives the right number only when the debentures are issued at par; at a premium or a discount it gives a wrong number (1,05,000 / 100 = 1,050 in the example).

• Option (2) Amount Paid / Issue Price — Incorrect. Nothing is paid to the vendor in cash; the debentures are the payment, so there is no amount paid to divide.

• Option (4) Amount Paid / Face value — Incorrect. It has both faults: no cash amount is paid, and the face value is the right divisor only for an issue at par.