Question

Autumn Corporation was organized in August. It is authorized to issue 100,000 shares of $100 par value 7% preferred stock and 500,000 shares of $5 par value common stock. During the year, the corporation had the following transactions:

Record the journal entries for the transactions

Answer 1

A minimum of three investors is required to change the company's top management, assuming they vote together. Investors 1 and 2, with their combined 38,000 shares, cannot always get their way unless they form a coalition with at least one more investor to surpass the 50% threshold.

Step-by-step explanation:

To determine the minimum number of investors needed to change the company's top management, we need to find out how many shares constitute a majority vote. In the Darkroom Windowshade Company, with 100,000 shares of stock outstanding, more than 50,000 shares would be required for a majority. Investor 1 and Investor 2 together have 38,000 shares, which is not enough to guarantee them control over the company. However, adding Investor 3, who owns 15,000 shares, would bring the total to 53,000 shares, thereby achieving a majority. Consequently, a minimum of three investors is required to change top management, assuming they vote together.

If Investors 1 and 2 agree to vote together, they cannot be certain of always getting their way in how the company is run because they would only control 38% of the voting power. They would need to form a coalition with at least one more investor to surpass the 50% threshold needed for a majority vote.