On December 31, 20X5, CI Co $\quad$ $\quad$ $\quad$

question 22

Essay

On December 31, 20X5, CI Co. purchased 100% of the outstanding common shares of SA Ltd. for $1,100,000 in cash; 80% of the cash was obtained by issuing a five-year note payable. The statements of financial position of CI and SA immediately before the acquisition and issuance of the notes payable were as follows (in 000s):
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { CI } \quad \quad \quad \quad \quad \quad\text { SA }$
$\begin{array}{lllll}&\text { Book } & \text { Fair } & \text { Book } & \text { Fair } \\&\text { Value } & \text { Value } & \text { Value } & \text { Value } \\\text { Cash } & \$ 360 & \$ 360 & \$ 200 & \$ 200 \\\text { Accounts receivable } & 520 & 500 & 380 & 380 \\\text { Inventory } & 800 & 880 & 400 & 450 \\\text { Property, plant, and equipment } & \underline{1,820} & 2,000 & \underline{1,420} & 1,520 \\& \$ 3,500 & & \$ 2,400 &\end{array}$
$\begin{array}{lllll}\text { Current liabilities } & \$ 380 & \$ 380 & \$ 260 & \$ 260 \\\text { Long-term liabilities } & 1,200 & 1,200 & 1000 & 1030 \\\text { Common shares } & 500 & & 600 & \\\text { Retained earnings } & \underline{1,420} & & \underline{540} & \\& \$ 3,500 & & \$ 2.400 &\end{array}$ Required:
Prepare the journal entry that CI will post to record the acquisition of SA. Prepare the consolidated statement of financial position for CI immediately following the acquisition of SA.

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Definitions:

Valid Consideration

Valid consideration in a contract represents something of value that is given by all parties involved, serving as the reason or inducement to enter into the contract.

Adequacy Of Consideration

Refers to the fairness of the bargain in a contract, ensuring that what is exchanged holds reasonable value.

Detriment

A loss or harm suffered as a result of an action or decision.

Illusory Promise

A statement or promise that is vague or lacks commitment and does not legally bind the person making it.