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Going Concern Sale

26 February 2009 2,341 views 2 Comments

Hi all,

I have converted a Trading as into a CC, and want to sell the assets of the Trading as to the CC.

We need to notify Ministry of Finance about the “going concern” sale within 21 days, and they may then zero rate the VAT for the sales transaction. Both the trading as and CC is registered for VAT.

I have prepared the transactions for the “going concern sale”; can someone tell me if the entries are correct?

Going Concern Sale from T/A to CC

TRADING AS

DR – Creditors 40,000.00

CR – Debtors 300,000.00

CR – Motor Vehicles – NBV 267,000.00

CR – Bank 160,000.00

DR – Loan – CC 687,000.00

Net effect – going concern 727,000.00

The sales price will be the net amount of N$687,000

The sales price will not be paid cash, it will be handled through a loan account in the trading as and the CC

Motor Vehicles will be sold at NBV.

CLOSE CORPORATION

DR – Motor Vehicles – NBV 267,000.00

DR – Debtors 300,000.00

DR – Bank 160,000.00

CR – Creditors 40,000.00

CR – Loan – Trading As 687,000.00

Thank you

Juanita
Accountant: Tax and Inventory

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2 Comments »

  • admin (author) said:

    Message from Alan

    Hi,

    Deferred tax

    Again under taxation, TOBAGC transfer assets at Tax Written Down Value (TWDV).

    This will create a temporary timing difference on a financial reporting point of view, namely on the Motor Vehicle.

    Example:

    TWDV = 100K

    MV at NBV = 267K

    Taxable temporary difference = 167K (resulting in Deferred tax @ Corporate Tax rates)

    Possibly, you should apply IFRS 3 and create a goodwill equal to the deferred tax (since the other items are transferred at TWDV).

    Property, plant and equipment

    The CC should review its motor vehicle’s remaining useful life. Logically, it would be less than the useful life under the trading.

    Other than that, everything else looks okay.

    # 2 March 2009 at 9:35 am
  • admin (author) said:

    Message from an other member
    Hi,

    Deferred tax

    Again under taxation, TOBAGC transfer assets at Tax Written Down Value (TWDV).

    This will create a temporary timing difference on a financial reporting point of view, namely on the Motor Vehicle.

    Example:

    TWDV = 100K

    MV at NBV = 267K

    Taxable temporary difference = 167K (resulting in Deferred tax @ Corporate Tax rates)

    Possibly, you should apply IFRS 3 and create a goodwill equal to the deferred tax (since the other items are transferred at TWDV).

    Property, plant and equipment

    The CC should review its motor vehicle’s remaining useful life. Logically, it would be less than the useful life under the trading.

    Other than that, everything else looks okay.

    # 2 March 2009 at 1:42 pm

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