UK Full disposal of subsidiary

[Diana]

Hi all,

I wonder if anyone could help with the double entry and consolidation of the following.

Parent (P Ltd) owns all the shares of Subsidiary ( S Ltd). S Ltd's share capital is 1 ordinary share of £1.00.


S owes P £1m as inter-company loan and
S has a bank loan of £2m

Buyer (B Ltd) buys S Ltd agreeing to pay the bank loan £2m, the inter-company loan £1m and a further £1m for the shares (total £4m).

What are the accounting treatment in the individual accounts of P Ltd, S Ltd and consolidated group accounts?

 

[Becky]

Hi Diana, welcome to the forum!

You had posted your query in the archive so it probably wouldn't have been seen by the other members - I've moved it to the correct section for you.

 

[kirby]

When B Ltd buys S from P , B will pay P 2MM GBP

B's books

Investment in S 2MM GBP
Cash (2MM) GBP

P's Books
Cash 2MM GBP
Invest in S (2MM) GBP

Now that B owns S it can arrange to pay S's 2MM GBP bank loan
The question seems to imply that B will pay this loan itself so then;

B's books

Due From S 2MM GBP
Cash (paid to bank) (2MM) GBP

S's books

Bank Loan Payable 2MM GBP
Due to B (2MM) GBP

and of course when B creates its consolidated financials it eliminates the Due from and the Due to accounts.