On January 1, 2020, Victory Co. Acquired 60% of the shares of sauce limited by issuing shares valued at $1.5 million. On this date sauce limited building and machinery had remaining useful lives of 10 years and five years respectively. Both victory co and sauce limited use straight line depreciation.

The separate entity statements of financial position for victory and sauce Limited just prior to the acquisition are presented below.

Statements of financial position

As of January 1, 2020

	Victory Co.	Sauce Ltd	Sauce Ltd
Noncurrent assets
Land		450,000	800,000
Building	2,600,000	1,500,000	1,300,000
Accumulated depreciation	-400,000	-500,000
Machinery	1,750,000	1,300,000	100,000
Accumulated depreciation	-700,000	-800,000
Total noncurrent assets	3,250,000	1,950,000
Current assets
Inventories	800,000	300,000	300,000
Amounts receivable	700,000	200,000	200,000
Cash	500,000	100,000	100,000
Total current assets	2 million	600,000
Total assets	5,250,000	2,550,000
Shareholders equity
Common shares	2,200,000	1 million
Retained earnings	2,250,000	650,000
Total shareholders equity	4,450,000	1,650,000
Noncurrent liabilities
Long-term loans		500,000	500,000
Current liabilities
Accounts payable	800,000	400,000	400,000
Total liabilities	800,000	900,000
Total liabilities and shareholders equity	5,250,000	2,550,000

The separate entity statements for victory co And sauce limited At the end of 2020 are presented below.

Statements of financial position

As of December 31, 2020

	Victory corporation	Sauce Limited
Noncurrent assets
Long-term loan receivable	500,000
Land		1,350,000
Building	3 million	1,500,000
Accumulated depreciation	-450,000	-600,000
Machinery	2 million	1,300,000
Accumulated depreciation	-800,000	-900,000
Investment in sauce limited	1,500,000
Total noncurrent assets	5,750,000	2,650,000
Current assets
Inventories	1,600,000	600,000
Amount receivable	600,000	300,000
Cash	280,000	100,000
Total current assets	2,480,000	1 million
Total assets	8,230,000	3,650,000
Shareholders equity
Common Shares	3,700,000	1 million
Retained earnings	3,480,000	1,350,000
Total shareholders equity	7,180,000	2,350,000
Noncurrent liabilities
Long-term loans	650,000	1 million
Current liabilities
Accounts payable	400,000	300,000
Total liabilities	1,050,000	1,300,000
Total liabilities and shareholders equity	8,230,000	3,650,000

Statements of comprehensive income

For the year ended December 31, 2020

	Victory corporation	Sauce Limited
Sales	20 million	10 million
Dividend income	240,000
Gain on sale of machine
Other income	70,000
	20,310,000	10 million
Cost of sales	10 million	6 million
Other operating expenses	8,860,000	2,800,000
Interest expense	20,000	100,000
Total expenses	18,880,000	8,900,000
Net income and comprehensive income	1,430,000	1,100,000

Statements of comprehensive income

For the year ended December 31, 2020

	Victory corporation	Sauce limited
Retained earnings December 31, 2021	2,250,000	650,000
Net income	1,430,000	1,100,000
Dividends declared	-200,000	-400,000
Retained earnings, December 31, 2020	3,480,000	1,350,000

During 2020 victory and sauce limited had the following transactions between them

• On June 30, 2020 sauce Limited borrowed $500,000 from victory corporation at an interest rate of 10% with simple interest. Interest is to be paid at the end of each calendar year. Sauce limited did not pay the 2020 interest.
• During 2020 Limited sold $4 million of goods to victory corporation. At the end of 2020 $1 million of those goods were still in victory corporations ending inventory. Sauce limited charged victory corporation the same price it charges all its other customers.
• During 2020 victory corporation sold $2 million of goods to sauce limited. At the end of 2020 $400,000 of those goods were still in sauce limited ending inventory victory corporation charged sauce limited the same price it charges all its other customers.

There was no impairment of Goodwill for 2020.

The separate entity statements victory corporation and sauce limited at the end of 2021 are presented below.

Statements of financial position

As of December 31, 2021

	Victory corporation	Sauce Limited
Noncurrent assets
Long-term loan receivable
Land		1,350,000
Building	3,800,000	1,500,000
Accumulated depreciation	-562,000	-700,000
Machinery	2,300,000	1,875,000
Accumulated depreciation	-680,000	-645,000
Investment in sauce limited	1,500,000
Total noncurrent assets	6,358,000	3,380,000
Current assets
Inventories	1,300,000	550,000
Amounts receivable	1,200,000	770,000
Cash	640,500	525,000
Total current assets	3,140,500	1,845,000
Total assets	9,498,500	5,225,000
Shareholders equity
Common Shares	3,700,000	1 million
Retained earnings	3,480,000	2,050,000
Total shareholders equity	7,180,000	3,050,000
Noncurrent liabilities
Long-term loans	1,800,000	1,200,000
Current liabilities
Accounts payable	518,500	975,000
Total liabilities	2,318,500	2,175,000
Total liabilities and shareholders equity	9,498,500	5,225,000

Statements of comprehensive income

For the year ended December 31, 2021

	Victory corporation	Sauce limited
Sales	22 million	11 million
Dividend income	360,000
Gain on sale of machine	100,000
Other income	120,000
	22,580,000	11 million
Cost of sales	13 million	6,600,000
Other operating expenses	8,640,000	2,920,000
Interest expense	200,000	180,000
Total expenses	21,840,000	9,700,000
Net income and comprehensive income	740,000	1,300,000

Statements of comprehensive income

For the year ended December 31, 2021

	Victory corporation	Sauce limited
Retained earnings, December 31, 2021	3,480,000	1,350,000
Net income	740,000	1,300,000
Dividends declared	-740,000	-600,000
Retained earnings, December 31, 2020	3,480,000	2,050,000

Additional information for 2021:

• During 2021 victory corporation purchased $1,600,000 of goods from sauce limited. At the end of the year, 50% of those goods were still in victory corporations ending inventory.
• During December 2021 sauce limited purchased $400,000 of goods from victory corporation. At the end of the year 100% of those goods were still in sauce limited ending inventory.
• Both victory corporation and limited gross margins for these goods were unchanged from previous years.
• At the end of 2021 sauce limited did not pay the interest due on the loan from victory corporation however both companies had accrued the interest.

Required:

Prepare a set of consolidated financial statements for 2021 using the fair value enterprise approach.