Canada Note payable regarding a shareholder buyout

[Terry Ma]

Hello. My situation is that there are two shareholders within our corporation. One bought out the other using cash and a loan. We are using the corporation's funds to pay the loan down. What would the accounting entries by for the sale and the loan payment?

I think that the sale is separate from the books of the business. However, we are using the business' funds to pay the loan. Is there some type of way to account for the loan under the books of the corporation?

 

[kirby]

Lost on this.....
I am reading your note this way - tell me if this is wrong;
If SELLER sold as of -say- 8/1/15 then SELLER is no longer an owner as of 8/1/15. So if you used any cash AFTER 8/1/15 to pay down loan then you are using BUYER's cash to pay down SELLER's loan. Yikes!!
If above not accurate - just tell me correct version.

 

[Terry Ma]

I'll use an example

X and Y are the only shareholders of Acme. X buys out Y shares for $1000. X pays $200 cash and a loan (note payable) to Y for the remaining $800. X uses Acme's cash to pay the monthly payments.

What are the accounting entries for the above?

 

[kirby]

At point of sale Acme makes no entry but does record in its stock ownership records that x owns 100% of stock.

When x uses Acme money to pay y for the loan, you have to ask x if this is x borrowing money from Acme or if this is coming out of equity. So answer is you have to ask x