Question

At what level of investment ownership is significant influence often presumed?

a) 10% to 20%
b) 30% to 40%
c) 50% to 60%
d) 70% to 80%

Answer 1

Significant influence over a company is often presumed when an investor holds between 20% to 50% of the voting stock, starting at around 20%. For specific cases, like that of the Darkroom Window Shade Company, investors 1 and 2 combined do not have the majority needed to unilaterally change top management.

Step-by-step explanation:

The student is asking about the level of investment ownership at which significant influence is often presumed. Significant influence is typically presumed when an investor holds between 20% to 50% of a company's voting stock. While this range represents where significant influence is exerted, the presumption commonly starts at the lower end at about 20%. This is important in accounting because it determines the method of accounting for the investment, such as the equity method in financial reporting.For the case mentioned about the Darkroom Windshake Company, if investors 1 and 2 vote together, they would own 38,000 shares combined which is 38% of the company's total shares. The minimum number of investors required to change the company's top management would depend on the bylaws, but typically a majority of 50% plus one vote is required. Thus, investors 1 and 2 would need additional support to ensure they can always get their way in managing the company.