Accounting treatment of consideration shares

What is the accounting treatment of consideration shares issued via SPA

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Hi all, not sure if I am overthinking this and would appreciate your feedback please.

Company A was owned by 2 shareholders 50/50 - SH1 and SH2.

These shares were purchased by company B through a SPA with total consideration of £400k as follows:

-  Shares held by SH1 for £200k in cash  (DR Investments, CR Bank)

-  Shares held by SH2 for £200k in "Consideration shares"

Company B has isued share capital of 100 ordinary shares of £1.

Would the double entry for the consideration shares simply be DR Investments, CR Share premium?

Many thanks in advance.


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By paul.benny
13th Mar 2024 19:25

I read this that SH2 has bought out the other shareholder by creating a Newco. S/he effectively does an exchange where they get all the shares in Newco in exchange for their shares in Oldco. Meanwhile and Newco buys out SH1.

Aside from the par value of the shares in Newco, I agree with your entries.

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Replying to paul.benny:
By Claire Hughes
14th Mar 2024 12:52

Thank you very much!

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