Exercise 4

Monarch Corporation paid $180,000 for a 75% interest in Stem Co.s outstanding Capital Stock on January 1, 2005, when Stems stockholders equity consisted of $150,000 of Capital Stock and $50,000 of Retained Earnings. Book values of Stems net assets were equal to their fair values on this date. The adjusted trial balances of Monarch and Stem on December 31, 2005 were as follows:
				Packer		Stem
Cash			$	8,250	$	35,000
Dividends receivable				7,500
Other current assets				40,000		50,000
Land				50,000		30,000
Plant assets-net				100,000		150,000
Investment in Stem				195,000
Cost of sales				225,000		125,000
Other expenses				45,000		25,000
Dividends				25,000		20,000
			$	695,750	$	435,000
Accounts payable			$	40,750	$	35,000
Dividends payable						10,000
Capital stock				150,000		150,000
Retained earnings				75,000		50,000
Sales revenue				400,000		190,000
Income from Stem				30,000
			$	695,750	$	435,000
Required: Complete the partially prepared consolidated balance sheet working papers that appear below.

Please explain