Holding company
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 |
||||||
|
Common stock holdings |
Long-term debt | 40,000.00 | ||||
| Company A | 40,000.00 | Preferred Stock | 25,000.00 | |||
| Company B | 60,000.00 | Common Stock equity | 35,000.00 | |||
| Total | 100,000.00 | Total | 100,000.00 | |||
|
Company A |
||||||
| Current Assets | 100,000.00 | Current Liabilities | 100,000.00 | |||
| Fixed Asssets | 400,000.00 | long-term debt | 200,000.00 | |||
| Total | 500,000.00 | Common stock equity | 200,000.00 | |||
| Total | 500,000.00 | |||||
|
Company B |
||||||
| Current Assets | 180,000.00 | Current Liabilities | 100,000.00 | |||
| Fixed Assets | 720,000.00 | long-term debt | 500,000.00 | |||
| Total | 900,000.00 | Common stock equity | 300,000.00 | |||
| Total | 900,000.00 | |||||
a.Whatpercentage of the total assets controlledby Scully Corporation does its common stock equity represent?
b.If another company owns 15% of the common stock of Scully Corporation and, by virtue of this fact, has voting control, whatpercentage of the total assets controlleddoes the outside company’s equity represent?
c.How does a holding company effectively provide a great deal of control for a small dollar investment?
d.Answer partsaandbin light of the following additional facts.
(1) Company A’s fixed assets consist of $20,000 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 $50,000 of total assets.
(3) Company B’s fixed assets consist of $60,000 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 $300,000 and $400,000, respectively.
P18–12 Holding company 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 | ||||||
| Common stock holdings | Long-term debt | 40,000.00 | ||||
| Company A | 40,000.00 | Preferred Stock | 25,000.00 | |||
| Company B | 60,000.00 | Common Stock equity | 35,000.00 | |||
| Total | 100,000.00 | Total | 100,000.00 | |||
| Company A | ||||||
| Current Assets | 100,000.00 | Current Liabilities | 100,000.00 | |||
| Fixed Asssets | 400,000.00 | long-term debt | 200,000.00 | |||
| Total | 500,000.00 | Common stock equity | 200,000.00 | |||
| Total | 500,000.00 | |||||
| Company B | ||||||
| Current Assets | 180,000.00 | Current Liabilities | 100,000.00 | |||
| Fixed Assets | 720,000.00 | long-term debt | 500,000.00 | |||
| Total | 900,000.00 | Common stock equity | 300,000.00 | |||
| Total | 900,000.00 | |||||
- What percentage of the total assets controlled by Scully Corporation does itscommon stock equity represent?
- If another company owns 15% of the common stock of Scully Corporation and,by virtue of this fact, has voting control, what percentage of the total assets controlleddoes the outside company’s equity represent?
- How does a holding company effectively provide a great deal of control for asmall dollar investment?
- Answer parts a andb in light of the following additional facts.
(1) Company A’s fixed assets consist of $20,000 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 $50,000 of totalassets.
(3) Company B’s fixed assets consist of $60,000 of stock in both Company E andCompany F. In both cases, this level of ownership gives it voting control.Companies E and F have total assets of $300,000 and $400,000, respectively.
