Question

Motorcity, Incorporated purchased 63,000 shares of Shaw common stock for $278,000. This represents 40% of the outstanding stock. The entry to record the transaction includes a:

a. Debit to Common Stock and a Credit to Cash
b. Debit to Stockholders' Equity and a Credit to Accounts Payable
c. Debit to Investments in Shaw Stock and a Credit to Cash
d. Debit to Retained Earnings and a Credit to Dividends

Answer 1

The minimum number of investors needed to vote to change the company's top management is 3. Investors 1 and 2 together cannot be certain of always getting their way in how the company will be run.

Step-by-step explanation:

The minimum number of investors it would take to vote to change the company's top management is calculated by adding up the shares owned by investors until it reaches more than 50% of the total outstanding shares. In this case, the total outstanding shares is 100,000. Investors 1 and 2 together own 20,000 + 18,000 = 38,000 shares. However, this is not enough to reach the majority. The minimum number of investors needed is 3, because adding investor 3 who owns 15,000 shares would bring the total to 53,000 shares, which is more than 50% of the total outstanding shares.

Investors 1 and 2, even if they vote together, cannot be certain of always getting their way in how the company will be run. This is because they would only have 38,000 shares, which is less than 50% of the total outstanding shares. In order to have control and ensure that their votes always have the majority, they would need to acquire more shares.