I have a question regarding the following scenario. Much obliged if there are some Accounting Gurus out there that can confirm my double entries..
Company A = 100 shares of £1each fully paid up.
Shares were held by the following individuals
50 ord shares – Mr Y
50 ord shares – Mr Z
Mr Y died and company was valued at £300k.
Mr Z formed Newco H (Holding company was formed) 2 shares issued of £1 each.
Holding company acquire shares in company A:
£150k to estate of Mr Y (interest free loan over a period of 2 years) for his entire 50 shares
Mr Z – share for share exchange - 50 shares in Company A for 98 shares in Holding company.
What are the accounting entries in Holding company please?
My thoughts are:
Fixed asset investment £300k (debit)
Loan £150k (credit)
Share premium £150k less £98 (credit) £149,902
Share capital £100 (credit)
Cash £2 (debit)
Please note clearance has been given by HMRC for this transaction.
As the Holding company will be a micro company (FRS 105), I believe that ;
Fixed asset investment can be held at cost (less impairment)
Interest free loan – no need to recognise at “present value of the future payments”
Any help would be greatly appreciated.