Question

Orange Ltd. took over assets of ₹ 7,00,000 and liabilities of ₹ 60,000 of Purple Ltd. for a purchase consideration of ₹ 6,30,000 payable by the issue of 10% Debentures of ₹ 100 each at a premium of 10% and, if need be, a part of the purchase consideration in cash. How will the company meet the purchase consideration?

पर्याय

• By the issue of ₹ 5,72,727, 10% Debentures at a premium of ₹ 57,272 with no cash.

• By the issue of ₹ 5,72,000, 10% Debentures at a premium of ₹ 57,200 and cash of ₹ 800.

• By the issue of ₹ 5,72,720, 10% Debentures at a premium of ₹ 57,272 and cash of ₹ 8.

• By the issue of ₹ 5,72,700, 10% Debentures at a premium of ₹ 57,270 and cash of ₹ 30.

Answer 1

By the issue of ₹ 5,72,700, 10% Debentures at a premium of ₹ 57,270 and cash of ₹ 30.

Explanation:

The company will meet the purchase consideration by the issue of ₹ 5,72,700, 10% Debentures at a premium of ₹ 57,270 and cash of ₹ 30.

Calculation of purchase consideration:

₹ 6,30,000 is the Net purchase consideration payable in 10% Debentures of ₹ 100 + ₹ 10 (premium)

`therefore (₹ 6,30,000)/(₹110) = 5,727` debentures @ ₹ 100

∴ ₹ 5,727, 10% Debentures of ₹ 100 each at a premium of ₹ 57,270 and the balance in cash:

∴ ₹ 6,30,000 − ₹ 5,72,700 − ₹ 57,270 = ₹ 30 (in cash)