Purchases Of Businesses By Limited Companies ( Part 1)

March 20th, 2007 Comments off
Share |

(A) Basic Principles when a limited company takes over another business

(1) It can satisfies the purchase consideration by giving

  • cash,
  • shares or debentures
  • assuming the trade liabilities
  • any combination of cash, shares/debentures/assuming trade liabilities

(2)  the assets acquired are often different from the values shown in the vendor business’s book ( example : ten years ago, the vendor company bought a property for $100,000 and now the purchasing company have to buy it for $1 million)

(3)  total purchase consideration > net tangible assets of the vendor company where the excess is called goodwill and this goodwill account will appear in the purchasing company’s book

(4) total purchase consideration < net tangible assets is treated as a Capital Reserve

(B) The Purchaser (limited company) can buy:

· a sole proprietorship or

· a partnership or

· another limited company’s business

Comments are closed now.

Financial Accounting

 
 

Advertise Here | Brain Teasers/Puzzles | Greeting Cards | Inspirational Quotes | Jokes/Humor | Useful Links | Motivational Stories | Resource | Shopping | Share/Express Your Views | Testimonials | Universities/Colleges | Words of Wisdom from Religions | FREE POSTING OF ACCOUNTING & FINANCE JOBS VACANCY|