USA stock buyback


Joined
Apr 3, 2019
Messages
1
Reaction score
0
Country
United States
Hi, I work as a book keeper for a corporation that has two owners / shareholders.

They have an agreement that if the company buys back shares from the investor/owner, they get allocated to the CEO/owner. However, their is a premium that has to be paid for the buyback as an interest payment.

For example the company pays $500,000 ($250,000 is applied to common stock repurchase and the other $250,000 is a premium that is paid to the investor), and then the stock repurchased gets transferred to the CEO/owner for free.

What are the journal entries for this? Any guidance or help would be much appreciated.
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
1,588
Reaction score
216
Country
United States
Wow, what these owners are doing is not apparent to me but let's do this anyway.
For your transaction:
DrTreasury stock - $250,000 (common repurchase)
Dr Paid in Capital in Excess of Par $250,000 (premium)
Cr Cash ($500,000)

And reduce the shares owned by Investor Owner on your stock ledger and add the Tstock to the CEO Owner on the stock ledger.

If there is no or not enough PICIEOP to absorb the debit or stock has no par value, then charge to another Equity a/c.

The repurchased stock is now Treasury Stock which typically cannot be paid dividends and has no voting rights. So it is equivalent to owning 100% of nothing. Financial gymnastics to get nowhere for CEO owner.....
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top