Reference no: EM132711690

Quitzau's Fishing Inc. (QFI) is a privately owned company that elects to report its financial results in accordance with Part II (ASPE) of the CPA Canada Handbook - Accounting. QFI owns 40,000 of the 50,000 (80%) common shares of Marshall's Kiteboarding Corp. (MKC). Pertinent financial information is as follows:

1. The two companies have a common year end of December 31, 20X6.
2. QFI purchased its interest in MKC on January 1, 20X3, for $600,000 cash. At that time, the acquisition differential was $100,000, consisting of a $25,000 fair value increment on equipment and $75,000 in goodwill. On the acquisition date, the remaining useful life of the equipment was five years. The equipment, which has an estimated residual value of $0, is depreciated on a straight-line basis. 
3. For the year ended December 31, 20X6, MKC's net income was $110,000, and MKC declared and paid dividends of $90,000 to its common shareholders. 
4. For the year ended December 31, 20X6, QFI's net income from its own operations was $150,000, and QFI declared and paid dividends of $70,000 to its common shareholders.

Problem 1: Assume that MKC's shares are not quoted in an active market and that QFI elects to value its investment using the cost method. What was the total investment-related income that QFI should have reported on its income statement for the year ended December 31, 20X6, pertaining to its investment in MKC?

a) $11,000

b) $72,000

c) $83,000

d) $88,000