Nelson Industries, a U.S.-based company, has over the years issued 1 million shares of common stock to shareholders. Currently, in evaluating ownership, Nelson has entered into a stock repurchase agreement to buy a significant block of its stock from a major stockholder that represents a controlling interest in the company. However, the major stockholder has agreed to sell at a price higher than the current market price. The stockholder has agreed to a price of $25 per share, which is in excess of the current market price of $20 per share.
Nelson’s controller is somewhat unsure of the proper accounting for this purchase. She believes that the treasury stock purchase should be at the $20 per share price and the excess written off as some type of loss since the purchase agreement does not include any other rights or privileges. The controller seeks your advice as to the proper accounting for the treasury stock repurchase.

Required: 

Utilize the FASB’s Codification to provide a recommendation to the controller for the treasury stock purchase transaction. Provide specific Codification references.