Discussion:Additional stock purchase
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Discussion Forum Index --> Accounting Questions --> Additional stock purchase
| 23 May 2007 | |
| Hello,
I have a client who wishes to contribute a portion of his note payable from his wholly-owned corporation to additional stock. He would like to contribute $50,000 of a $200,000 note payable. How do I record this on the books? Is it simply a debit to the payable and credit common stock? Are their any other issues I should be concerned with other than a change to his corporated records? I know this is probably an Accounting 101 question. Thank you for your input, DJC | |
| 23 May 2007 | |
| Not quite that simple, but yes on the books your would debit the NP and credit stock. However, the loan documents need to reflect this additional stock or apic and then of course need documentation on the increased stock basis and decreased loan basis.
If it is a single s/h then it is a smaller issue than if it is a multiple s/h corporation. Make sure to reflect as well the change in the amortization schedule for interest paid or accrued on the NP to the S/H... Taxation issues will need to be addressed but if you are only trying to deal with the balance sheet of the corporation, then the aje is simple enough :) | |
| May 25, 2007 | |
| And, it should be documented in the minutes from a meeting of the shareholders and board of directors that this transaction was approved. | |
Doug Phillips (talk|edits) said: | 26 May 2007 |
| No, don't make a JE.
Do it the right way. Swap checks. | |
| 1 June 2007 | |
| If this is a C-corp or S-Corp with a sole shareholder why convert the note to stock at all? If S-Corp loan gives basis for losses just like capital. If a C-Corp then you are only tying up cash, that can be returned easier if this money is kept as a loan. | |
