USA stock buyback

[JMCDACCT]

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.

 

[kirby]

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.....