110k views
0 votes
If Chen's executives exercise 2,000 of the 10,000 options (20 percent of the options) on June 1, 2023 (three years and five months after date of grant), the company records the following journal entry.

User Dsuma
by
7.8k points

1 Answer

0 votes

Final answer:

To change the top management of The Darkroom Windowshade Company, a majority vote of more than 50% is needed, which in this case would require the agreement of at least three investors. Investors 1 and 2 combined do not have a majority; therefore, they cannot be certain of always getting their way without other investors' support.

Step-by-step explanation:

The Darkroom Windowshade Company case is an example of calculating shareholder voting power in a corporate setting. To change the company's top management, a simple majority of more than 50% of the voting power is required. To calculate the minimum number of investors needed to achieve this majority, we sum up the shares owned by the investors in descending order until we surpass 50,000 shares (which is just over 50% of 100,000 shares).

Investor 1 has 20,000 shares, and Investor 2 has 18,000 shares. Together, they control 38,000 shares. Investor 3 has 15,000 shares, which, if added to Investor 1 and 2's shares, exceeds the 50% threshold with a total of 53,000 shares. Therefore, it would take a minimum of three investors to change the company's top management. As for whether Investors 1 and 2 can always get their way in running the company, they cannot be certain since their combined shareholding (38,000 shares) does not constitute a majority without the support of additional investors.

User Knowledge
by
7.5k points