How does an s corp account for a shareholder buyout?

[tracey1]

A major shareholder wanted out of an s corp. None of the other shareholders were in the position to buyout the other shareholder. So company funds were used to buyout the shareholder and then the ownership was divided among the remaining shareholders proportionally to their ownership. I'm assuming it's okay for a corporation to buyback a shareholder's shares but I'm not sure how to enter this on the ledger.

[bwa]

This isn't really a tax question, because the buyback and reissue of the shares do not create any income or deductions.

The buy back would be an entry similar to

Dr Treasury Stock

     Cr Cash

The reissue would be an entry similar to

Dr Stock Dividends (if the remaining shareholders didn't pay for the additional shares).

     Cr Treasury Stock

Make sure you make appropriate entries in the stock register.