All within a group of companies:
Company A had Eur 100 payable outstanding to company B at 31 Jan 2020 (intercompany)
At 01 Feb company B acquired the business trading assets and liabilities of company A for Eur 800
How would you treat the Eur payable
would you settle it against the purchase price I.e. let's say net assets in company A are Eur 300
would the accounting be
In company A:
Dr 100 payable to B
Cr 400 BS
Dr 800 Bank
Cr gain on sale 500
in company B
Cr 100 receivable to A
Dr 400 BS
Cr 800 Bank
Dr loss on sale 500
in A
many thanks
Replies (7)
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In company B I would have
Dr Goodwill 500
Dr Net Assets acquired 400
Cr Debtors ( to a/c Co A) 100
Cr Bank 800
I then net the debtor I originally have against the credit to my SLCA (self) I acquired within my new sales Ledger
There’s a presumption that the fair value of A’s net assets approximates to the carrying value in the accounts. What if they’re actually worth 800?
I relied upon "lets say". Given the initial suggestions from the OP I suspect a less nuanced answer may more assist them rather than a discussion surrounding the £300.
Selling company has:
Dr Bank 800
Cr Net assets sold 300
Cr Disposal proceeds( re what is probably goodwill )500