Your client Douglas Inc. has asked for your advice on the accounting for the following transactions. The company entered into these in its current fiscal year ending on December, 31, 2016.

Treasury stock:

Douglas has issued a 1 million shares of common stock to shareholders. On November, 1, 2016, the company entered into a stock repurchase agreement to buy a significant block of its stock ( 300,000 shares) from a major stock holder. The mjor stock holder agrees to sell, but at a price higher than the current market price. The stockholder has agreed to a price of $25 per share that is in excess of the current maket price of $20 per share. The controller 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 type of other rights or privileges.

Required:

1) Prepare a memo to explain the proper accounting for each of the items listed using the FASB codification to support your accounting treatment.

2) Prepare any 2016 journal entries related to the the transactions. The memo should have an introduction and conclusion.