Reference no: EM132806097

Question - 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:

The two companies have a common year end of December 31, 20X6.

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.

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.

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.

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