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Journal entries regarding a company take over.

Ltd company taking over another Ltd company

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 Company A Ltd has purchased Company B Ltd that will remain a Ltd company for £48,000. What are the Journal entries for Company A who will want that payment repaid, and similary the entries for Company B  

 

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By Tim Vane
14th Feb 2020 20:52

Who is repaying Company A?

The entries in Company B are as follows:

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By Accountant A
14th Feb 2020 21:37

Welshman50 wrote:

 What are the Journal entries for Company A who will want that payment repaid, and similary the entries for Company B  PLEASE

 

Fixed that for you.

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By Matrix
15th Feb 2020 08:19

No entries in company B, why would there be? What do you think the entries in A should be, can’t you just go back to basics and look at how they paid and what they bought?

If you are just the bookkeeper then ask the accountant who advised on the transaction.

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Replying to Matrix:
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By Welshman50
17th Feb 2020 21:39

PRAT

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Replying to Welshman50:
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By Matrix
17th Feb 2020 22:11

It was a genuine response, I have n0 idea why you have responded this way.

Be kind.

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Replying to Matrix:
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By carnmores
17th Feb 2020 22:24

Of all the people to go after i am truly shocked that they chose you Matrix, anyway hope you are bearing up. Nick

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Replying to Welshman50:
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By JoF
17th Feb 2020 22:41

Welshman50 wrote:

PRAT

Uncalled for!

Why have you not thanked those who have answered?

Why have you not answered the question raised by more than one respondent?

How odd.

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Replying to JoF:
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By carnmores
17th Feb 2020 22:55

I think he may have been referring to A A not Matrix

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Replying to carnmores:
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By JoF
17th Feb 2020 23:26

That's also not called for in my book as my bug bear is the lack of a please or a thank you. Just called someone out for the lack of a thanks on another forum and then they tried to say I was the rude one. Beggars belief sometimes.

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Replying to Welshman50:
Richard Hattersley
By Richard Hattersley
18th Feb 2020 13:25

Welshman50 wrote:

PRAT

Moderator here. Please do not post personal comments towards other members that could be interpreted as offensive or inflammatory.

Not that it needs reminding but this is a forum for professionals and we ask that it is treated as such.

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By GW
15th Feb 2020 10:36

I'm missing something, if I go to my local supermarket and buy a tin of beans, I have an asset (the beans) I wouldn't expect to be repaid. So when Company A buys another company it has an asset (company B) why would it expect to be repaid?

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Replying to GW:
Psycho
By Wilson Philips
15th Feb 2020 12:01

Perhaps because A is doing the shopping on behalf of an elderly neighbour ;)

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Hallerud at Easter
By DJKL
15th Feb 2020 13:07

I suspect the OP using the word repaid may be shorthand for getting their money back, if this is the case how this might happen is Company B has distributable reserves (or makes profits to get them) and then pays dividends to Company A so Company A then covers the cost of its investment over time.

If the OP means something else then I am stumped.

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By Accountant A
15th Feb 2020 17:09

Maybe makes more sense in Welsh:

"Mae Cwmni A Cyf wedi prynu Cwmni B Cyf a fydd yn parhau i fod yn gwmni Cyf am £ 48,000. Beth yw'r cofnodion Cyfnodolyn ar gyfer Cwmni A a fydd am i'r taliad hwnnw gael ei ad-dalu, ac yn debyg i'r cofnodion ar gyfer Cwmni B."

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By carnmores
16th Feb 2020 10:57

aren't most of the contributors on here lovely! i will never understand why people reply if all they want to do is effectively tell you to FOFF. At best its ungracious at worst its trolling and may lead to mental distress.

anyway i have to do a UK consolidation this year for a multi million £ $ company with a new US subsidiary and a minority interest for the first time since 1978 it is not something i am looking forward to much.

however it is probable that you do not need to do a consolidation so the simple bookkeeping entries in A is Dr Investment in subsidiary £48k Cr Bank £48k (if its a bank / cash transaction).

you mention repayment of the purchase price, that is not usual and far too complicated to go into here and the companies will need detailed professional advise . DJKL has kindly indicated a possible way to go.

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Replying to carnmores:
Hallerud at Easter
By DJKL
16th Feb 2020 13:58

A consolidation with currency translation complete with minority interest- in days of yore a much loved staple of the ICAS examiners.

At least I do not need to go back to the 70s since my last one, I only need to reach back to the 1980s. I can further confirm that these days I would certainly need a refresher course.

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Replying to DJKL:
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By carnmores
16th Feb 2020 14:46

LOL DjKL my great grandfather was Thomson McLintock he didnt leave me any textbooks

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Replying to carnmores:
Hallerud at Easter
By DJKL
16th Feb 2020 15:12

A Glasgow accountant- quality pedigree- I started out in Glasgow with Hodgson Impey (now part of RSM) but then returned to Edinburgh in 1987.

You probably do not want his textbooks, somewhere I have a late Victorian/ early Edwardian textbook picked up in a charity shop (Munro, I think) and a slightly later Carters Advanced Accounts- they are both pretty dry.

More useful may be my ICAEW, circa 1950s ,Consolidated Accounts textbook which is I think with my similar period ICAEW Standard Costing guide,though not sure where they now all are (I think in a box at work).

I must admit I used to have a predilection for picking up old texts but very few have stood the test of time (except my at one point new but now old 1980s Samuels and Wilkes,that still gets a place in my office bookcase)

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Replying to DJKL:
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By carnmores
16th Feb 2020 15:48

I trained in london with Sydenhams who i think merged with Hodgsons a few years after i left. There was a partner Philip Migdale who was fantastic and taught me so much

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Replying to carnmores:
Hallerud at Easter
By DJKL
16th Feb 2020 18:36

That would likely be with Hodgson Harris who were ,with Chalmers Impey ,the firms making up Hodgson Impey (I think they merged circa late 1984/early 1985 as when I started in 1985 the Glasgow Office (Ex CI) was still using the Chalmers Impey audit manual)

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Replying to DJKL:
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By carnmores
16th Feb 2020 18:59

Aha thats it Hodgson Harris thank you. N

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Replying to carnmores:
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By johnt27
17th Feb 2020 15:46

carnmores wrote:

anyway i have to do a UK consolidation this year for a multi million £ $ company with a new US subsidiary and a minority interest for the first time since 1978 it is not something i am looking forward to much.

This may be unnecessary but for a multi-currency consol hopefully the following will help...

I'll ignore the goodwill calc - I'm assuming you can deal with this. All pre-acq'n reserves/equity are dealt with at the spot rate prevailing on the acq'n date and this should give you your elimination journals. These don't get adjusted to future spot rates - a mistake I've previously made!

At year end all your foreign sub's balance sheet figures will be converted at the year end spot rate to the reporting currency - simple enough. For the P&L you convert using the average rate for the reporting period (unless you want to get really detailed and do it at a more granular level).

The above creates the first FX issue as average rate P&L does not reconcile with the spot rate reserves b/fwd and c/fwd. Luckily you get to bung this reconciling difference into an FX reserve through other comprehensive income/equity. You'll have a similar FX issue on MI.

You'll also find similar FX adjustments required on tangible/intangible fixed asset tables as these get adjusted to year end spot rates requiring an extra reconciling line in the tables for both cost and depreciation/amortisation.

Last but not least the cashflow statement (apart from being a nightmare) will have an FX balancing correction for the non-cash effect of all these FX movements/differences.

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Replying to johnt27:
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By carnmores
17th Feb 2020 16:19

Thank you very much for your helpful reply J. Goodwill & Forex I can cope with .. I think. Its the MI and dreaded cashflow statement I worry about tho in my day 1978 :-) I was a bit of a wizz on source and application of funds statements. Looks like an audit will be necessary as well so I might be off the hook! Nick

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