Assignment 8, Question 4: All-Stores, Inc., is a holding company that has voting
ID: 2801147 • Letter: A
Question
Assignment 8, Question 4:
All-Stores, Inc., is a holding company that has voting control over both General Stores and Star Stores. All-Stores owns General Stores and Star Stores common stock valued at $15,000 and $12,000 respectively. General's balance sheet lists $130,000 of total assets; Star has total assets of $110,000. All-Stores has total common stock equity of $20,000.
a. What percentage of the total assets controlled by All-Stores does its common stock equity represent?
b.If a stockholder holds $5,000 worth of All-Stores common stock equity, and this amount gives this stockholder voting control, what percentage of the total assets controlled does this stockholder's equity investment represent?
Explanation / Answer
Answer: Percentage of total assets that common equity represent :
(stock holding of general stores + stock holding of star stores )/ ( total assets of general stores + total asset of star stores)
= (15000 + 12000)/(130000 + 110000)
= 27000/(240000)
= 0.1125 or 11.25%
Answer B: percentage of total assets controlled :
$5000/ $20000 = 25% of the holding rights
25% * 11.25 = 2.81 % of the total assets have been controlled by his investment