please do B only

Question 2 (80 marks) On January 2, 20X7, Victory Co, acquired 60% of the shares of Sauce Ltd, by issuing shares valued at $1,200,000. On this date. Sauce's building and machinery had estimated remaining useful lives of 10 years and 5 years respectively. Both Victory and Sauce use straight-line depreciation. The separate-entity statements of financial position for Victory and Sauce just prior to the acquisition are presented below. Statements of Financial Position As of January 1, 20X7 Victory Co. (Carrying Value) Sauce Ltd. (Carrying Value) ( Value) (Fair $ $ 640.000 1,040,000 Noncurrent assets: - Land Building Accumulated depreciation Machinery Accumulated depreciation Total noncurrent assets Current assets: Inventories Accounts receivable Cash Total current assets Total assets 2,080,000 (320,000) 1,400,000 (560.000) 2.600.000 360,000 1,200,000 (400,000) 1,040,000 (640,000) 1.560.000 80.000 640,000 560,000 400.000 1.600.000 $4,200.000 240.000 160.000 80.000 -480.000 $2.040.000 240,000 160,000 80,000 $1,760,000 1.800,000 3,560,000 $ 800,000 520.000 1,320,000 Shareholders' Equity: Common shares Retained earnings Total shareholders' equity Noncurrent liabilities: Long-term bank loan Current liabilities: A/P and accrued liabilities Total liabilities Total liabilities and shareholders' equity 400,000 400,000 320,000 640,000 640,000 320.000 720,000 $4,200,000 $2.040.000 The separate-entity financial statements for Victory and Sauce at the end of 20X7 are presented below. Statements of Financial Position As of December 31, 20X7 Noncurrent assets: Long-term loan receivable Victory Co. Sauce Ltd. $ 400,000 $ Land Building Accumulated depreciation Machinery Accumulated depreciation Investment in Sauce Ltd. Total noncurrent assets Current assets: Inventories Amounts receivable Cash Total current assets Total assets 1,080,000 1,200,000 (480,000) 1,040,000 (720,000) 2,400,000 (360,000) 1,600,000 (640,000) 1.200.000 4.600.000 2.120,000 1,280,000 480,000 224,000 1.984,000 $6.584,000 480,000 240,000 80.000 800.000 $2.920.000 $2,960,000 2.784,000 5,744,000 $ 800,000 1,080.000 1,880,000 Shareholders' Equity: Common shares Retained earnings Total shareholders' equity Noncurrent liabilities: Long-term loans Current liabilities: Accounts payable Total liabilities Total liabilities and shareholders' equity 520,000 800,000 320,000 840.000 240.000 1.040.000 $6.584,000 $2.920.000 Statements of Comprehensive Income For the year ended December 31, 20X7 Sales Dividend income Other income Cost of sales Other operating expenses Interest expense Total expenses Victory Co. Sauce Ltd. $16,000,000 $8,000,000 192.000 P 56.000 16.248.000 8.000.000 8,000,000 4.800.000 7,088,000 2.240.000 16.000 80.000 15.104.000 7.120.000 d comprehensive income s 1.144 000 $ 880.000 Statements of Change in Equity - Retained Earnings Section For the year ended December 31, 20X7 Retained earnings, December 31, 20x6 $1.800.000 $ 520,000 Victory Co. Sauce Ltd. 1.144,000 880,000 (160.000 (320.000) Retained earnings, December 31, 20x7 $2.784.000 $1.080.000 Net income Dividends declared During 20X7, Victory and Sauce had the following transactions between them: On June 30, 20X7, Sauce borrowed $400,000 from Victory at an interest rate of 10% (simple interest). Interest is to be paid at the end of each calendar year. Sauce did not pay the 20x7 interest. During 20X7, Sauce sold $3,200,000 of goods to Victory. At the end of 2007, $800,000 of those goods were still in Victory's ending inventory. Sauce charged Victory the same price it charges all its other customers. During 20X7, Victory sold $1,600,000 of goods to Sauce. At the end of 20X7, $320,000 of those goods were still in Sauce's ending inventory. Victory charged Sauce the same price it charges all its other customers. There was no impairment of goodwill for 20X7. The separate-entity financial statements for Victory and Sauce at the end of 20X8 are presented below. ACCT 451v13 Assignment 1 August 201 Statements of Financial Position As of December 31, 20X8 Noncurrent assets: Land Building Victory Co. Sauce Ltd. Accumulated depreciation Machinery Accumulated depreciation Investment in Sauce Total noncurrent assets Current assets: Inventories Accounts receivable Cash Total current assets Total assets - $1,080.000 3,040,000 1,200,000 (449,600) (560,000) 1.840,000 1,500,000 (544,000) (516,000) 1.200.000 5.086,400 2,704.000 1.040,000 440,000 960,000 616,000 510.400 420.000 2.512.400 1.476,000 $7.598.800 $4.180.000 Shareholders' Equity: Common shares $2,960,000 $ 800,000 Retained earnings 2.784.000 1.640.000 Total shareholders' equity 5,744,000 2.440,000 Noncurrent liabilities: Long-term loan 1,440,000 960,000 Current liabilities: Accounts payable 414.800 780.000 Total liabilities 1,854,800 1,740,000 Total liabilities and shareholders' equity $7.598.800 $4.180.000 Statements of Comprehensive Income For the year ended December 31, 20X8 Victory Co. Sauce Ltd. Sales $17,600,000 $8,800,000 Dividend income 288,000 Gain on sale of machine 80.000 Other income 96.000 18.064.000 8,800.000 Cost of sales 10,400,000 5,280,000 Other operating expenses 6,912,000 2,336,000 Interest expense 160,000 144.000 Total expenses 17.472.000 7.760,000 Net income and comprehensive income $ 592.000 $ 1.040.000 ements of Change in Equity - Retained Earnings Section For the year ended December 31, 20X8 Victory Co. Sauce Ltd. ned earnings, December 31, 20x7 $2,784,000 $1,080,000 592,000 1,040,000 (592.000) (480.000) Retained earnings, December 31, 20XB $2.784.000 $1.640.000 Additional information for 20X8: Net income Dividends declared During 20X8, Victory purchase $1,280,000 in goods from Sauce. At the end of the year, half of these goods were still in Victory's inventory. During December 20X8, Sauce purchased $320,000 in goods from Victory. At the end of the year, all of these goods were still in Sauce's inventory. Both Victory and Sauce's gross margins for these goods were unchanged from previous years. At the end of 20X8, Sauce did not pay the interest due on the loan from Victory however, both companies had accrued the interest. Required: a) Prepare a consolidated statement of financial position at the acquisition date b) Prepare a set of consolidated financial statements for 20x7. c) Calculate Victory's consolidated retained earnings for 20X8. Do not prepar financial statements. Question 2 (80 marks) On January 2, 20X7, Victory Co, acquired 60% of the shares of Sauce Ltd, by issuing shares valued at $1,200,000. On this date. Sauce's building and machinery had estimated remaining useful lives of 10 years and 5 years respectively. Both Victory and Sauce use straight-line depreciation. The separate-entity statements of financial position for Victory and Sauce just prior to the acquisition are presented below. Statements of Financial Position As of January 1, 20X7 Victory Co. (Carrying Value) Sauce Ltd. (Carrying Value) ( Value) (Fair $ $ 640.000 1,040,000 Noncurrent assets: - Land Building Accumulated depreciation Machinery Accumulated depreciation Total noncurrent assets Current assets: Inventories Accounts receivable Cash Total current assets Total assets 2,080,000 (320,000) 1,400,000 (560.000) 2.600.000 360,000 1,200,000 (400,000) 1,040,000 (640,000) 1.560.000 80.000 640,000 560,000 400.000 1.600.000 $4,200.000 240.000 160.000 80.000 -480.000 $2.040.000 240,000 160,000 80,000 $1,760,000 1.800,000 3,560,000 $ 800,000 520.000 1,320,000 Shareholders' Equity: Common shares Retained earnings Total shareholders' equity Noncurrent liabilities: Long-term bank loan Current liabilities: A/P and accrued liabilities Total liabilities Total liabilities and shareholders' equity 400,000 400,000 320,000 640,000 640,000 320.000 720,000 $4,200,000 $2.040.000 The separate-entity financial statements for Victory and Sauce at the end of 20X7 are presented below. Statements of Financial Position As of December 31, 20X7 Noncurrent assets: Long-term loan receivable Victory Co. Sauce Ltd. $ 400,000 $ Land Building Accumulated depreciation Machinery Accumulated depreciation Investment in Sauce Ltd. Total noncurrent assets Current assets: Inventories Amounts receivable Cash Total current assets Total assets 1,080,000 1,200,000 (480,000) 1,040,000 (720,000) 2,400,000 (360,000) 1,600,000 (640,000) 1.200.000 4.600.000 2.120,000 1,280,000 480,000 224,000 1.984,000 $6.584,000 480,000 240,000 80.000 800.000 $2.920.000 $2,960,000 2.784,000 5,744,000 $ 800,000 1,080.000 1,880,000 Shareholders' Equity: Common shares Retained earnings Total shareholders' equity Noncurrent liabilities: Long-term loans Current liabilities: Accounts payable Total liabilities Total liabilities and shareholders' equity 520,000 800,000 320,000 840.000 240.000 1.040.000 $6.584,000 $2.920.000 Statements of Comprehensive Income For the year ended December 31, 20X7 Sales Dividend income Other income Cost of sales Other operating expenses Interest expense Total expenses Victory Co. Sauce Ltd. $16,000,000 $8,000,000 192.000 P 56.000 16.248.000 8.000.000 8,000,000 4.800.000 7,088,000 2.240.000 16.000 80.000 15.104.000 7.120.000 d comprehensive income s 1.144 000 $ 880.000 Statements of Change in Equity - Retained Earnings Section For the year ended December 31, 20X7 Retained earnings, December 31, 20x6 $1.800.000 $ 520,000 Victory Co. Sauce Ltd. 1.144,000 880,000 (160.000 (320.000) Retained earnings, December 31, 20x7 $2.784.000 $1.080.000 Net income Dividends declared During 20X7, Victory and Sauce had the following transactions between them: On June 30, 20X7, Sauce borrowed $400,000 from Victory at an interest rate of 10% (simple interest). Interest is to be paid at the end of each calendar year. Sauce did not pay the 20x7 interest. During 20X7, Sauce sold $3,200,000 of goods to Victory. At the end of 2007, $800,000 of those goods were still in Victory's ending inventory. Sauce charged Victory the same price it charges all its other customers. During 20X7, Victory sold $1,600,000 of goods to Sauce. At the end of 20X7, $320,000 of those goods were still in Sauce's ending inventory. Victory charged Sauce the same price it charges all its other customers. There was no impairment of goodwill for 20X7. The separate-entity financial statements for Victory and Sauce at the end of 20X8 are presented below. ACCT 451v13 Assignment 1 August 201 Statements of Financial Position As of December 31, 20X8 Noncurrent assets: Land Building Victory Co. Sauce Ltd. Accumulated depreciation Machinery Accumulated depreciation Investment in Sauce Total noncurrent assets Current assets: Inventories Accounts receivable Cash Total current assets Total assets - $1,080.000 3,040,000 1,200,000 (449,600) (560,000) 1.840,000 1,500,000 (544,000) (516,000) 1.200.000 5.086,400 2,704.000 1.040,000 440,000 960,000 616,000 510.400 420.000 2.512.400 1.476,000 $7.598.800 $4.180.000 Shareholders' Equity: Common shares $2,960,000 $ 800,000 Retained earnings 2.784.000 1.640.000 Total shareholders' equity 5,744,000 2.440,000 Noncurrent liabilities: Long-term loan 1,440,000 960,000 Current liabilities: Accounts payable 414.800 780.000 Total liabilities 1,854,800 1,740,000 Total liabilities and shareholders' equity $7.598.800 $4.180.000 Statements of Comprehensive Income For the year ended December 31, 20X8 Victory Co. Sauce Ltd. Sales $17,600,000 $8,800,000 Dividend income 288,000 Gain on sale of machine 80.000 Other income 96.000 18.064.000 8,800.000 Cost of sales 10,400,000 5,280,000 Other operating expenses 6,912,000 2,336,000 Interest expense 160,000 144.000 Total expenses 17.472.000 7.760,000 Net income and comprehensive income $ 592.000 $ 1.040.000 ements of Change in Equity - Retained Earnings Section For the year ended December 31, 20X8 Victory Co. Sauce Ltd. ned earnings, December 31, 20x7 $2,784,000 $1,080,000 592,000 1,040,000 (592.000) (480.000) Retained earnings, December 31, 20XB $2.784.000 $1.640.000 Additional information for 20X8: Net income Dividends declared During 20X8, Victory purchase $1,280,000 in goods from Sauce. At the end of the year, half of these goods were still in Victory's inventory. During December 20X8, Sauce purchased $320,000 in goods from Victory. At the end of the year, all of these goods were still in Sauce's inventory. Both Victory and Sauce's gross margins for these goods were unchanged from previous years. At the end of 20X8, Sauce did not pay the interest due on the loan from Victory however, both companies had accrued the interest. Required: a) Prepare a consolidated statement of financial position at the acquisition date b) Prepare a set of consolidated financial statements for 20x7. c) Calculate Victory's consolidated retained earnings for 20X8. Do not prepar financial statements