In 1975, Dominic and Cassandra Tripp started farming the land known as Hope-Hy Farm in Ashburn Ontario, growing vegetables as well as hog farming. After their two children were born, they thought they needed something else to occupy their time. On the 1980 Grey Cup weekend, Cassandra baked and sold their first pies on a small table at the end of their driveway. It was a major success! Over the years, Dominic and Cassandra have made many changes and new additions to the farm. In the last 40 years, small family farming has changed, but one thing still remains the desire to bring the freshest products to their community.

During the recent pandemic Dominic and Cassandra offered to deliver their fresh products to their customers but were struggling with delivery capacity. On July 1, 2020 they purchased 20% of the outstanding common shares of Howard Trucking owned by Darcy Howard for $14,000. As part of the agreement with Darcy, Dominic and Cassandra agree to the following terms and conditions:

Board representation	1 of 25 seats
Delivery capacity of Howard acquired	2%

By year end the value of the Howard shares had increased to $18,000. Howard earned $20,000 for the year ended December 31, 2020 which is earned even throughout the year. Howard paid dividends twice per year on June 30^th and December 31^st. The December 31^st dividend totaled $5,000.

With a desire to help their community and work with other local farmers and businesses, Dominic and Cassandra are also considering investing in the Ashburn Food Hub (AFH). AFH started with a few farmers working together to sell each other's food and deliver to homes through no-contact delivery. Hope-Hy has the facilities (fridge storage, freezer storage & dry storage) to serve as a collection point for food.

On September 30, 2020 Dominic and Cassandra agreed to purchase all the common shares of AFH as follows:

FMV of consideration paid by Hope-Hy	$250,000
FMV of net assets acquired by Hope-Hy	$229,000

One local farmer recently approached Cassandra about selling their small batch jams and preserves in the Hope-Hy store. On November 1, 2020 Greaves Family Jams delivered 20 cases of jam valued at $20,000 and having a cost of $12,000. Mr. Greaves asked Hope-Hy to let him know when the inventory is getting low and he will drop more off. They have a hand-shake deal that Hope-Hy will receive 10% of all the Greaves jam sold in the store. Dominic was worried about the jars freezing now that the weather is colder as the store is not heated in the winter but Mr. Greaves said not to worry and that he will be responsible for any damaged or unsellable inventory. By December 31^st, 2020 Hope-Hy had sold $5,000 of the Greaves products.

On December 30, 2020 Dominic agreed to exchange several pieces of farm equipment plus cash of $2,500 for vacant land next door to Hope-Hy owned by the local truck dealer Lakeridge Motors. Dominic intends to set up a pop-up farmers market to take advantage of the customer traffic at Hope-Hy during the spring planting and fall harvest seasons on the land that is not suitable for farming. The equipment was originally purchased by Hope-Hy on January 1, 2018 for $80,000 with a useful life of five years. Another local farm equipment dealer was willing to purchase the equipment for $42,500 and Dominic feels this amount approximates the fair value.

New for 2021 Hope-Hy is thinking of expanding into the growing of medical cannabis plants on the vacant land acquired from Lakeridge Motors once the spring pop-up farmers market is completed. Dominic has run some numbers and expects the following results over the next 2 years:

Cannabis		2022	2021
Beginning inventory		2,420	-
Ending inventory		3,670	2,420
Cost of goods sold		6,145	2,960

Since the plants have a 12-week growth cycle and are completely harvested, they would not be accounted for as bearer plants. As the growing season is only 90 days at Hope-Hy, Dominic is not certain if this would be a good fit for them. He has read that successful cannabis producers turn their inventory over 6 times per year. They have approached the bank for financing for the plants and the bank would like to see positive working capital and a current ratio of less than two. You have prepared the following projected information for Hope-Hy for the year ended December 31, 2021

		Projected December 31, 2021 (thousands)
Current assets		214
Long term assets		3,840
Total assets		4,054
Current liabilities		89
Long term debt		2,580
Common shares		250
Retained earnings		1,135
Total Liabilities and equity		4,054

You have recently been promoted to the position of Controller at Hope-Hy. Dominic and Cassandra ask you to write a memo to them in proper memo format explaining how to account for the above transactions in their GAAP financial statements prepared for the bank. Dominic and Cassandra are very involved in the business and the community, they prefer to keep things simple and will always follow the letter of the law to maintain their excellent reputations. Your memo should include the reasoning for your recommendation(s) and any alternatives available to Dominic and Cassandra. Hope-Hy follows ASPE for their accounting records.