Cannabis Funding Inc Case Study - Green Choco Inc - Medical Cannabis Inc - Cash Inventory - Accounting and Finance Assignment Help

Assignment Task:

Cannabis Funding Inc Case Study Accounting and Finance Assignment Help

Case Study 

Cannabis Funding Inc. Case Assignment 

Cannabis Funding Inc. (CFI) is a Canada-based investment company that seeks to provide investor returns through investment and capital appreciation in the Canadian cannabis industry. CFI provides funding for facility expansions, operations and initial construction in exchange for equity interests and a portion of the cultivation production. CFI invests in and supports cannabis cultivation companies in Canada and facilitates connections between licensed producers and consumers. 

CFI completed its initial public offering (IPO) on January 1, 2018 and began its operations on that date. The Company trades on the TSX Venture and therefore reports under IFRS. Today is February 1, 2019. You have recently joined CFI as the new VP Finance. Your first major task is to assist CFI with the December 31, 2018 financial statements for reporting purposes. The major accounting considerations have yet to be made for the investments below. 

Green Choco Inc (GCI) 

CFI purchased 45% of the shares of a new Company – Green Choco Inc (GCI) on February 1, 2018 for $1 per share. GCI is a newly formed entity where 45% of the shares are owned by CFI, and the remaining 55% of the shares are owned by Silver Health Therapeutics (SHT). There are no separate agreements which provide CFI or SHT with rights to the specific assets and obligations of GCI. 

GCI was formed to operate a cannabis production facility in Ontario. The main operator of GCI will be SHT management. SHT will run the day to day operations of GCI. A board of directors for GCI was created that includes CFI’s chief operating officer and SHT’s chief operating officer. Major business decisions surrounding funding, cannabis strain selection, sales channels and other significant operating issues must go through the board of directors for approval. If the approval of decisions for the board of directors is split, the decision will go to third party arbitration. 

On March 1, 2018, CFI issued a $10,000,000 loan to GCI to help fund the operations. The loan charges an interest rate of 10% per year. On March 2, 2018, CFI owned land which it sold to GCI for $2,200,000. The land had a net book value on CFI’s books of $2,000,000. 
GCI is planning to finish its cannabis production facility in late 2019. GCI’s net loss from February 1, 2018 to December 31, 2018 was $1,200,000. 
Medical Cannabis Inc (MCI) 

On December 31, 2018, CFI purchased 4,500,000 common shares of Medical Cannabis Inc. (MCI) for $14,400,000. As at December 31, 2018, there are a total of 5,625,000 common shares outstanding. The remaining 1,125,000 common shares are held by the former owner of MCI. 
With this share purchase, CFI obtained 2 of the 3 seats on the board of directors. The remaining seat is held by the former owner of MCI. 

The reason CFI purchased the shares of MCI was because it expects to direct the relevant activities of MCI in the future. CFI also plans on providing additional funding to MCI in the future for an expansion of its cannabis facility. 

Once MCI is cash flow positive, CFI plans on declaring monthly distributions of dividends to be used as returns for the investors of CFI. 

The valuators also estimated the fair value of certain net assets that did not appear on MCI’s financial records. The valuators estimated that the workforce at MCI has an implied value of $1,200,000. The valuators estimated that MCI’s license to produce and sell cannabis is worth $10,500,000. The license was granted by Health Canada under the Access to Cannabis for Medical Purposes Regulations. Health Canada grants these licenses to cannabis producers who have appropriately applied for the license and whose facilities have passed the Health Canada inspection and protocol. The license relates to MCI’s current facility. The license cannot be transferred directly to another company, but if another company purchases the facility or the company owning the facility, the license remains valid. The license allows MCI to produce and sell cannabis. Without this license, a company cannot sell or cultivate cannabis in Canada. 

HK Smoke (HKS) 

CFI purchased 25% of the shares of HK Smoke (HKS) on April 1, 2018 for $5,000,000. HKS operates coffee shops that promote the cannabis life style. 
CFI purchased the shares of HKS to have some investment on the retail end of cannabis. The CEO of HKS was adamant that CFI will not interfere with the HKS operations through this investment. CFI did not receive any positions on the board of directors. CFI will be allowed to provide suggestions to the HKS board of directors; however, it’s at the board’s discretion to accept or reject these decisions. 

HKS generated an income of $150,000 from April 1, 2018, to December 31, 2018. HKS declared and paid a $100,000 dividend on September 1, 2018, to its shareholders. HKS is a private company and no price data is available for the share value. Therefore as on December 31, 2018, the investment remains at its cost of $5,000,000. 

Required: 

Please provide the relevant accounting treatment for the three transactions above. Your discussions should use the case facts and the appropriate technical accounting guidance and should be quantified when possible. 

This Accounting and Finance Assessment has been solved by our Accounting and Finance Experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.