On January 1^st, 2011, ABC Inc -Assuming That ABC Adheres to IFRS, What Effect (If Any)

question 2

Multiple Choice

On January 1^st, 2011, ABC Inc. purchased 30% of the outstanding voting shares of DEF Inc, a company whose operations rely heavily on ABC's managerial involvement, for $600,000. On that date, DEF's net assets had a fair value equivalent to their book values.
During 2011 and 2012, DEF Inc. earned income and paid dividends as follows:
$\begin{array}{|l|l|l|}\hline & \text { Income } & \text { Dividends } \\\hline 2011 & \$ 120,000& \$ 20,000 \\\hline 2012 & \$ 180,000& \$ 30,000 \\\hline\end{array}$

-Assuming that ABC adheres to IFRS, what effect (if any) would there be as on ABC's 2011 income as a result of this investment?

• A) No effect.
• B) $36,000 of dividend income.
• C) $36,000 of investment income.
• D) $20,000 of dividend income.
• E) $20,000 of investment income.