Virtual Corp. ("VC") Case Assignment

Virtual Corp. (VC) is a Canadian-based investment company that seeks to provide investor

returns through strategic investments of companies offering remote based services and other

online services.

VC completed its initial public offering (IPO) on January 1, 2020 and begun its operations on

that date. The Company trades on the TSX Venture and therefore reports under IFRS. VC is

effectively a shell company that raises capital through share issuances in CAD from Canadian

investors. The general and administrative costs incurred by VC are all incurred in CAD.VC's

presentation currency is the CAD.

Today is August 1, 2020. You have recently joined VC as the new VP Finance. Your first major

task is to assist WFI with the June 30, 2020 interim financial statements for reporting purposes.

The major accounting considerations have yet to be made for the investments and transactions

below.

Speed Inc.("SI")

On January 1, 2020, VC purchased 10,000,000 common shares of Speed Inc (SI) for $10,000,000 USD. SI also issued $5,000,000 USD of convertible debt to VC USD. Each $1 USD of convertible debt can be converted for 1 common share at an exercise price of $0.90 USD.

SI provides remote based conference services to customers. SI was wholly owned by two shareholders before the VC purchase.

With this share purchase, VC obtained 4 of the 7 seats on the board of directors. 1 of the remaining seats is held by the CEO ofWebcam Corp. ("WC"),2 of the remaining seats are held by the other two owners who hold the remaining 12,000,000 shares.

The reason VC purchased the shares of SI, was because it expects to direct the relevant activities of SI in the future. VC also plans on providing additional funding to SI in the future for improvements in its technology.

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

The following is a copy of the draft statement of financial position of SI.

Speed Inc

Statement of Financial Position

January 1, 2020 (In USD)

Book Value Fair Value

Current Assets. 1,000,000 1,200,000

Current Liabilities. 600,000. 700,000

Ordinary Shares. 300,000

Retained Earnings 100,000

A business valuator (CBV) has estimated the fair values that were not recorded on theaccounting records. The CBV has valued SI's brand at a fair value of $3,000,000USD, with an indefinite useful life. The brands haveboth been legally trademarked. SI's workforce has beenvalued at $1,000,000 USD. SI has a patent for its web-conferencing technology. This technology is utilized to generate subscription revenue. The patent has a legal life of 25 years, and the CBV estimates that the technology will be obsolete in 5 years. The patent has an estimated value of $5,000,000 USD.

SI is headquartered in Vancouver, British Columbia. A majority of its customers pay in USD.The Company's payroll costs are entirely paid in CAD. SI'soperating costs are in USD other than its rent costs.

Webcam Corp. ("WC")

VC purchased 15% of the shares of Webcam Corp. (WC) on February 1, 2020 for $1,000,000. WC manufacturers high quality webcams for business and individual consumers.

VC purchased the shares of WC to develop strategic partnerships with its other future technology investments.

VC'sChief Operating Officer joined the board of WC and is also acting as the Chief Operating Officer for WC until the Company finds a suitable full time Chief Operating Officer.

WC generated an income of $25,000 from February 1, 2020 to June 30, 2020, This came to a surprise to the management of VC, as VC was expecting a much stronger performance, especially with the increased prospect of sales due to COVID-19. VC is a private company, therefore no share data is available, however VC management believes it has significantly overpaid for the WC shares.

VC is considering purchasing the remaining 85% of shares of WC at a lower price per share to help turnaround operations in the future. The sale of webcams is distinctly different than conference services provided by SI, and the CEO would be monitoring this performance separately.

Required:

1. 1)Please provide the relevant accounting treatment for the two transactions above. Your discussions should use the case facts and the appropriate technical accounting guidance and should be quantified when possible.
2. 2)Please discuss if Virtual Corp. can use a CAD presentation currency. Please discuss the functional currency of Virtual Corp. and its controlled entities.
3. 3)Please discuss how the purchase of Webcam Corp.will impact the Company's financialstatement disclosures.