Special Festive Offer: 10% OFF Across All Membership Plans. Subscribe Now!

Accounting Treatment for issuance of shares and warrants for purchase of goods

741 views

Save Share

Atul

Student

23 Points Posted on 02 July 2024

Company A (buyer) enters into agreement with Company B to buy certain goods worth $1M. Company A issues shares worth $1M and warrants worth $0.5M to Company B. The cash received by Company A by issuing shares and warrants to Company B are utilized to make payment to Company B to purchase tools to manufacture products to be sold to Company A.

Questions:

1. What should be the accounting entries in the books of Company A for issuance of shares and warrants and also for payment made to company B considering production has not started yet at the end of the financial year. 2. What should be price at which shares are recorded considering Company A is not listed?

Replies (2)

Quick Summary

This discussion explores the complex accounting treatment for Company A, which issued shares and warrants to Company B in exchange for goods. The core questions revolve around the correct accounting entries for the share and warrant issuance, and the subsequent payment made to Company B for tools, especially when production hasn't commenced by year-end. Guidance on valuing shares for an unlisted company is also sought.