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| | {{ForumReplyPost|UserID=Natalie|Date=March 16, 2008|Text=''Note the shareholders of both corporations are the same'' - this tells me that you are talking about brother-sister corporations. In that case I would expect one company to debit A/R and credit revenue and the other to debit expense (or fixed assets) and credit A/P.}} | | {{ForumReplyPost|UserID=Natalie|Date=March 16, 2008|Text=''Note the shareholders of both corporations are the same'' - this tells me that you are talking about brother-sister corporations. In that case I would expect one company to debit A/R and credit revenue and the other to debit expense (or fixed assets) and credit A/P.}} |
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| | + | {{ForumReplyPost|UserID=DerekCPA|Date=16 March 2008|Text=I agree with Natalie. Should be Debit to Assets Credit to Due to Co. A and then on the other set of books Debit Due from Co. B and Credit Revenue. }} |
Revision as of 16:42, 16 March 2008
Discussion Forum Index --> Accounting Questions --> Transfer of Assets Between Related Corporations
Psimeone (talk|edits) said:
| 15 March 2008
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| Hello, I would like some help with acconting for the following issue. I have a client that is a corporation and they do computer programing consulting and sell computer software,which is internally developed. They started a new coporation to separate the service portion of their business from the product software portion of their business. Note the shareholders of both corporations are the same and so are their interest. I believe to account for this properly I would identify the assets, which are being sold to the new company and report in the new company the following entry Debit Assets Credit Common Stock. The old corporation, I would Credit the assets and I believe Debit investment in New Company. Note the new company is not going to transfer cash to old company for payment. In additon the old company does not have sufficient equity, so we cannot transfer their equity interest by a distribution. I believe the sale should be recorded at FMV, but the shareholders do not want to show a gain, and since all shareholders are the same we would like to transfer at book value the assets. My understanding this will have no tax cosequences in the end.
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Natalie (talk|edits) said:
| March 16, 2008
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| ?? I don't follow why you are touching the equity accounts.
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Psimeone (talk|edits) said:
| 16 March 2008
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| I am touching the equity account in the new company as I am Debiting Assets, what would be my offsetting credt if not equity? If they purchased the company you would record the assets as debits and credit equity. What is the entry you are suggesting?
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Natalie (talk|edits) said:
| March 16, 2008
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| Note the shareholders of both corporations are the same - this tells me that you are talking about brother-sister corporations. In that case I would expect one company to debit A/R and credit revenue and the other to debit expense (or fixed assets) and credit A/P.
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DerekCPA (talk|edits) said:
| 16 March 2008
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| I agree with Natalie. Should be Debit to Assets Credit to Due to Co. A and then on the other set of books Debit Due from Co. B and Credit Revenue.
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