We have currently taken on a client that was in the process of completing a share for share exchange and hive up of trade of assets. Intial calculations and clearance has been sought but they left the previous agent's prior to completing and submitting the accounts that accurately reflected the transactions that occured.
All of the below transaction have occurred on the same day:
1. Company A has purchased a 75% share holding (100 shares) in Company B for consideration of £450,000. Company A already own the other 25% of Company B, so therefore now 100% of Company B.
2. 69,391 ordinary £1 shares were issued for £450,000. These shares were issued to the shareholder that held then sold the 100 shares in Company B.
3. The trade and assets of Company B were sold to Company A for £1.
4. A director/shareholder of Company A had his shareholding of 27,600 Ordinary shares re-purchased back from the company for a consideration of £115,000.
5. The reserves of Company A at time of these transactions were £105,091.
6. Company B is now effectively dormant and is not worth anything.
Due to the nature of so much occuring on day, I am struggling how to accurately reflect all this with the correct journals.
Am I right in thinking that the end goal should be the investment in the subsidiary should be written down to Nil, the new share capital of the company accurately reflected and that the difference on the intercompany balance after the transfer of the trade and assets should be cleared to nil by way of intercompany dividends?
I would greatly appreciate any guidance on this.