` The Young Canadians (TYC) (60 Minutes)

It is now March 10, 2018. You, CPA, have just been hired as the new controller for The Young Canadians (TYC). Your first major task is to assist TYC with its December 31, 2017, financial statements. TYC is a small public company operating out of Toronto, Ontario.

The TYC Network is a fast-growing network of channels featuring general and niche programming. Programming includes news, politics, technology, sports, enter tainment and more. TYC only delivers content online and does not deliver content on the radio or television.

TYC was founded in 2005 by Cenk Iadarola (current CEO) in his living room. Since its humble beginning, the Company has grown to over 25,000 paying monthly members and 70 full-time employees.

TYC has been growing organically in the past, but it has made two equity purchases during the year: Channel Amazing (CA) and Brain Trust (BT)

Channel Amazing

Channel Amazing (CA) is a private online media production Company based out of Calgary, Alberta. TYC owned 12% of the Company in 2016. On January 1 2017, TYC increased its ownership in CA by 5% through a $100,000 share purchase. Cenk obtained a voting seat on the board of CA in January 2017 and participated in the decision of launching a significant new channel for CA.

CA has seen significant hardships in the current year. The revenue has declined by 20% compared to the same period last year. The net loss for the year doubled from last year to a loss of $500,000. The poor results look as if they will continue in the upcoming year.

The investment in CA is currently recorded as a fair value through profit in loss investment. The investment was recorded at $240,000 on TYCs books as at December 31, 2016. The investment in Channel Amazing is currently recorded at $340,000 as at December 31, 2017.

Brain Trust

Brain Trust (BT) is an online media production Company based out of Toronto, Montreal and Ottawa. BT challenges preconceptions, exposes amazing new facts and discoveries, explores different perspectives, and inspires its audience to learn more about the world and the people around them. The BT network currently has a very strong trademark value due to the viewers and website subscribers it has.

TYC purchased 100% of BT on January 1, 2017. TYC purchased BT for $2,000,000 of cash and $1,000,000 in potential cash consideration based on meeting BTs 2017 to 2018 revenue targets. The contingent consideration is payable on December 31, 2018. TYC also issued 100,000 TYC shares which had a stock price of $10 each on the acquisition date and had a 1 year trading restriction. Per independent valuators, due to these restrictions, a market investor would only pay 95% of the share price for these restricted shares.

` The Young Canadians (TYC) (60 Minutes)

Within its Toronto office, BT hosts 5 to 10-minute segments on various issues that would be of interest to their audience (pop culture, history, socializing, relationships and more). The two other satellite offices in Montreal and Ottawa are small and operate independently. These offices partner with local high schools within the city to help them create brand awareness videos. The Toronto office encompasses most of the Companys operations and has had a much better year than expected. Both the Montreal and Ottawa office have had a bad year financially. It appears both offices will be closed down by the end of 2018.

Cenk prepared the following purchase price allocation for the purchase of BT.

Purchase Price Allocation: Brain Trust

Cash Contingent Payment Shares Issued Total Consideration

Net Book Value of BT's Net Assets Allocation to Johnny Pie Allocation to Goodwill

$2,000,000 1,000,000 1,000,000 4,000,000

$ 500 ,000 1,000,000 2,500,000 4,000,000

Per discussion with Cenk, BT is not a capital-intensive business, as they do not own any significant capital assets. Hence, the only allocation of Goodwill he made was to the value of the CEO of Brain Trust, Johnny Pie. Cenk mentions that one of the reasons TYC bought BT was due to the popularity of Johnny Pie on online media networks. BT had patents worth $1,500,000 on January 1, 2017, relating to content it has created which are not recorded in the net assets above.

Originally, Cenk believed there was a 50% chance the contingent consideration to BT would be paid. The Toronto division of BT has done very well, and he now believes the chance the payout will be made is 75%. Even though the Ottawa and Montreal divisions of BT have done poorly, BT as a whole has grown.

The Goodwill relating to the BT acquisition remains recorded at $2,500,000 as of December 31, 2017.

Required:

Please provide the accounting adjustments relating to the two acquisitions for the year ended December 31, 2017. Your discussions should use the case facts, the appropriate technical accounting guidance and should be quantified when possible.