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 Liabilities and Stockholders' Equity Scully Corporation Common stock holdings Long-term debt $37,000 Company A $41,000 Preferred stock 20,000 Company B 57,000 Common stock equity 41,000 Total $98,000 Total $98,000
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 Liabilities and Stockholders' Equity Scully Corporation Common stock holdings Long-term debt $37,000 Company A $41,000 Preferred stock 20,000 Company B 57,000 Common stock equity 41,000 Total $98,000 Total $98,000
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,
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Assets
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Liabilities and
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Scully Corporation
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||||
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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. The percentage of the total assets controlled by Scully Corporation as its common stock equity represents is
2.93%. (Round to two decimal places.)
b. The percentage of the total assets controlled by the outside company's equity is
0.43%. (Round to two decimal places.)
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. (Select from the drop-down menu.)
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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VIEWStep 2: (a) Determine the percentage of the total assets controlled by S Corp as its common stock equity:
VIEWStep 3: (b) Determine the percentage of the total assets controlled by the outside company's equity:
VIEWStep 4: (c) Explain how holding company effectively provide a great control for a small dollar investment:
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