Easy Chair Company purchased 40 percent ownership of Stuffy Sofa Corporation on January 1, \(20 \mathrm{X} 1\), for \(\$ 150.000\). The balance sheet of Stuffy Sofa Corporation at the time of acquisition was as follows:

During 20X1 Stuffy Sofa Corporation reported net income of \(\$ 30.000\) and paid dividends of \(\$ 9,000\). The fair values of Stuffy Sofa's assets and liabilities were equal to their book values at the date of acquisition, with the exception of buildings and equipment, which had a fair value \(\$ 35,000\) above book value. All buildings and equipment had remaining lives of five years at the time of the business combination. The amount attributed to goodwill as a result of its purchase of Stuffy Sofa shares is not amortized.
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a. What amount of investment income will Easy Chair Company record during 20X1 under equitymethod accounting?

b. What amount of income will be reported under the cost method?

c. What will be the balance in the investment account on December 31, 20X1, under (1) costmethod and (2) equity-method accounting?

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STUFFY SOFA CORPORATION Balance Sheet January 1, 20X1 Cash Accounts Receivable Inventory $ 30.000 Current Liabilities 120,000 Bonds Payable 80.000 Land 150,000 Common Stock Additional $ 40.000 200,000 200,000 Buildings and Equipment $300.000 Less: Accumulated Paid-In Capital Retained Earnings 40,000 80.000 Depreciation (120,000) Total Assets 180,000 $560.000 Total Liabilities and Equities $560,000