Good Food Inc.Good Food Inc. $($GFI$)$ is a Canadian grocery delivery service specializing in organic groceries. GFI is owned by Tanya Salt, a professional chef, and a small group of local farmers.

To expand operations, Tanya needs cash and has approached Commercial International Bank $($Bank$)$ for loan which will be granted if GFI satisfies certain financial metrics, including a debt$-$to$-$equity ratio that is no higher than $2$:$1,$ calculated based on GFI$$s most recent annual financial statements prepared in accordance with generally accepted accounting principles $($GAAP$).$

It is April $11,2020.$ You are a loan assessment officer at the Bank. Your supervisor, Mai Chan, has asked you to review the loan application and prepare a draft memo outlining any accounting issues you discover, recommended next steps, and an overall conclusion on the application. She asked that your analysis be detailed and well supported.

Based on a review of the March $31,2020$ annual financial statements, you note the following:

$-$GFI$$s unaudited unconsolidated financial statements show net income of $$500,000,$ total liabilities of $$200,000,$ and total equity of $$150,000.$

$-$GFI purchased $46\%$ of the common share of Plant Ltd$.,$ an entity specializing in organic plants, permitting GFI to appoint $4$ out of the $7$ members of Plant Ltd$.$s Board of Directors. In the past two years, Plant Ltd$.$ has issued over $$500,000$ of bonds $($debt$)$ repayable in $2048.$

$-$On September $15,2019,$ GFI received an income tax assessment stating that it owes $$95,000$ of additional tax. Although GFI appealed this assessment, the appeal was unsuccessful. Tanya hired a junior tax attorney who believes the amount can be reduced or even potentially challenged and won. The tax assessment continues to be disclosed but not recognized.

$-$GFI has disclosed in the $$commitment note$$ that it hired Anna Gu$,$ a brilliant administrative director that will oversee all corporate administrative matters. Anna is expected to start work on September $1,2020$ at an annual salary of $$300,000$ per year.