FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
.MoFin LTD
On 10 November 2020, GoMo Ltd purchased 80% (800 shares) of the issued share
capital in a new UK company called ‘MoFin Ltd’. GoMo Ltd paid £160,000 for the issued
share capital.
‘MoFin” was originally run as a sole-trade by Mr Smith. On 10 November 2020, Mr Smith
transferred the business assets in to a newly incorporated company ‘MoFin Ltd’, in return
he received £160,000 cash and a 20% shareholding in the company (200 shares).
The market value of the net assets Mr Smith transferred to ‘MoFin Ltd’ on incorporation
was:
Market Value £
Internally generated
Freehold office* 127,000
Debtors 25,000
Creditors
Total net assests 200,000
*The freehold office was brought March 2011 for £50,000
Mr Smith, (who is 63 and a higher rate taxpayer), remains involved with the business as a
part-time director of MoFin Ltd.
) Calculate the
of ‘MoFin Ltd’ in the tax year 2020/21.
Your answer should take into consideration any incorporation and business asset disposal
(entrepreneur’s) relief which are available to Mr Smith
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