Scully Corporation holds enough stock in Company A and company B to give

| October 3, 2018

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’ equityScully CorporationCommon stock holdings Long-term debt $ 40,000Company A $ 40,000 Preferred stock 25,000Company B 60,000 Common stock equity 35,000Total $100,000 Total $100,000Company ACurrent assets $100,000 Current liabilities $100,000Fixed assets 400,000 Long-term debt 200,000Total $500,000 Common stock equity 200,000Total 500,000Company BCurrent assets $180,000 Current liabilities $100,000Fixed assets 720,000 Long-term debt 500,000Total $900,000 Common stock equity 300,000Total 900,000a. What percentage of the total assets controlled by 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, what percentage of the total assets controlled does the outside company’s equity represent?c. How does a holding company effectively provide a great dealĀ of control for a small dollar investment?d. Answer parts a and b 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 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.

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