G.S. Rai company Itd. purchased assets of the book value of Rs. 98,000 from another firm. It was agreed that purchase consideration be paid by issuing 11% debentures of Rs. 100 each. Assume debentures have been issued at discount of 20%

Identify the number of debentures issued by the company to the vendor

The correct option is 1225 debentures.

Here is the step-by-step explanation of how this value is calculated:

1. Identify the given values from the problem:
- Purchase consideration (amount to be paid to the vendor) = Rs. 98,000
- Nominal (Face) Value of each debenture = Rs. 100
- Discount percentage = 20%

2. Calculate the issue price of each debenture:
The debentures are issued at a discount of 20% on their face value.
Discount amount per debenture = 20% of Rs. 100
Discount amount = $\frac{20}{100}\times 100=\text{Rs. 20}$

Therefore, the issue price of each debenture is:
Issue Price = Face Value − Discount
Issue Price = Rs. 100 − Rs. 20 = Rs. 80

3. Calculate the number of debentures to be issued:
The number of debentures to be issued to the vendor is determined by dividing the total purchase consideration by the issue price per debenture:
Number of Debentures = $\frac{\text{Purchase Consideration}}{\text{Issue Price per Debenture}}$

Substituting the values into the formula:
Number of Debentures = $\frac{\mathrm{98,000}}{80}$

Number of Debentures = 1225

Thus, the company needs to issue 1225 debentures of Rs. 100 each at a 20% discount to settle the purchase consideration of Rs. 98,000.