Posted: December 1st, 2022

Cryptocurrency Market Inc.

Question 1 (40 points):
Cryptocurrency Market Inc. (the “Company”) provides various financial services, including lending services related to its digital assets that are not securities, such as Bitcoin (BTC). BTC is a cryptocurrency that is readily available on exchanges specializing in cryptocurrencies and, thus, is readily convertible to cash.

Borrower Loan
On December 31, 20X0, the Company entered into a lending transaction with XYZ Inc. (the “Borrower”) to loan the Borrower 100 BTC. Key terms of the loan are as follows:

• The effective date of the loan is December 31, 20X0, which is the date the BTC assets are transferred by the Company to the Borrower.
• The loan has no maturity date. The Borrower has the option to repay or return the loaned BTC at any time, and the Company has the right to demand immediate repayment of a portion or the entirety of the loaned BTC at any time.

In conjunction with the loan, the Borrower has agreed to pay the Company a financing fee. The financing fee will accrue from the date on which the loaned BTC are transferred to the Borrower to the date on which the entirety of the BTC loaned are repaid to the Company. The financing fee is an arm’s-length transaction.

The financing fee is calculated daily and paid monthly. The fee is 4.5 percent per annum and is payable in BTC. The Borrower is not required to provide collateral for the loan.

For the purpose of these questions, assume the following:
• The Company and the Borrower account for BTC as indefinite-lived intangible assets under ASC 350, Intangibles — Goodwill and Other.
• The Company does not have a controlling financial interest in the Borrower.
• There are no other rights and privileges exchanged in the loan.
•
Required:
1. What is the Company’s accounting for the 100 BTC loaned? Consider the accounting at the time of the initial transaction as well as any ongoing accounting requirements.

2. What is the Borrower’s accounting for the 100 BTC loaned? Consider the accounting at the time of the initial transaction as well as any ongoing accounting requirements.
Question 2 (35 points):
Zoovest Capital is a public corporation that invests in start-up and small- to medium- sized exotic animal zoos throughout the United States. Zoovest Capital is not an investment company in accordance with ASC 946.
Zoovest Capital holds a 20 percent interest in common stock of GW Zoo (GW), a small- sized exotic animal zoo in Oklahoma that is a corporation capitalized by common stock outstanding. Zoovest Capital has representation on GW’s board of directors, controlling two of the ten board seats, and participates in the policy-making process. The remaining 80 percent interest in GW is held by two large investors. The first investor, Lowe LLC (Lowe) has a 60 percent interest in common stock of GW and controls six of the ten board seats. The other investor, Stark Services Inc. (Stark) has a 20 percent interest in common stock of GW and controls two of the ten board seats.
Zoovest Capital also holds a 10 percent interest in common stock of MB Safari (MB), a medium-sized exotic animal zoo in South Carolina that is a corporation capitalized by common stock outstanding. Zoovest Capital has representation on MB’s board of directors, controlling two of the ten board seats, and participates in the policy-making process. Zoovest Capital is the largest shareholder in MB, followed by four other investors with common stock ownerships that range etween 7 percent to 9 percent each, and the remaining common stock ownership is widely dispersed among various other investors. Those four investors control one board seat each, and the remaining four board members are independently appointed by the six board members represented by the largest investors.

In 20X0, Zoovest Capital made a strategic decision to diversify its investment portfolio
and expand its investments to include wildlife rescues and sanctuaries. As a result of this
decision, Zoovest Capital acquired a 17 percent interest in common stock of BC Rescue
(BC), a wildlife rescue facility in Florida that is a corporation capitalized by common
stock outstanding. Zoovest Capital has representation on BC’s board of directors, controlling two of the twelve board seats, and participates in the policy-making process. The remaining 83 percent interest in BC is held by two large investors. The first investor, Baskin Group Inc. (Baskin) has a 58 percent interest in common stock of BC and controls seven of the twelve board seats, including the chairman. An executive from Baskin is also the chief executive officer (and the chairman). The other investor, Lewis Living Trust (Lewis) has a 25 percent interest in common stock of BC and controls three of the twelve board seats.
Required:
In consideration of the information presented above, answer the following questions
1. Does Zoovest Capital have significant influence over GW?
2. Does Zoovest Capital have significant influence over MB?
3. Does Zoovest Capital have significant influence over BC?

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