Scully Corporation holds enough stock in company A and company B to give it voting control of both firms. Consider the accompanying simplified balance sheets for these companies,
Scully Corporation holds enough stock in company A and company B to give it voting control of both firms. Consider the accompanying simplified balance sheets for these companies,
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter11: Stockholders' Equity
Section: Chapter Questions
Problem 11.7AP
Related questions
Question
Scully Corporation holds enough stock in company A and company B to give it voting control of both firms. Consider the accompanying simplified balance sheets for these companies,
.
Assets
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Liabilities and
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Scully Corporation
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||||
Common stock holdings
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Long-term debt
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$37,000
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Company A
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$41,000
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20,000
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Company B
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57,000
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Common stock equity
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41,000
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Total
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$98,000
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Total
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$98,000
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Company A
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||||
Current assets
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$99,000
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Current liabilities
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$101,000
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Fixed assets
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400,000
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Long-term debt
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200,000
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Total
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$499,000
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Common stock equity
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198,000
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Total
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$499,000
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Company B
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Current assets
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$179,000
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Current liabilities
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$101,000
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Fixed assets
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722,000
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Long-term debt
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501,000
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Total
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$901,000
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Common stock equity
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299,000
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Total
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$901,000
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a. What percentage of the total assets controlled by Scully Corporation does its common stock equity represent?
2.93%
b. If another company owns 14.8% of the common stock of Scully Corporation and, by virtue of this fact, has voting control, what percentage of the total assets controlled does the outside company's equity represent?
0.43%
c. How does a holding company effectively provide a great deal of control for a small dollar investment?
"By gaining voting control in a company for a small investment, then using that company to gain voting control in another, a holding company provides control for a relatively small investment." Is the above statement true or false?
True
d. Answer parts a and b in light of the following additional facts.
(I need help with this part)
(1) Company A's fixed assets consist of $19,000 of common stock in company C. This level of ownership provides voting control.
(2) Company C's total assets of $400,000 include $15,000 of stock in Company D, which gives Company C voting control over company D's $52,000 of total assets.
(3) Company B's fixed assets consist of $55,000 of stock in both company E and company F. In both cases, this level of ownership gives it voting control. Companies E and F have total assets of $298,000 and $395,000, respectively.
d. With additional facts, the percentage of the total assets controlled by Scully Corporation as its common stock equity represents is
enter your response here%. (Round to two decimal places.)
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