A corporation that uses the equity method of accounting for its investment in a 40%-owned investee (that earned $20,000 and paid $5,000 in dividends) made the following entries: $8,000 Investment in investee Investment Income $8,000 Cash Retained Earnings $2,000 $2,000 What effect will these entries have on the investor's statement of financial position? Select one: O a. Investment fairly stated, retained earnings overstated O b. Investment understated, retained earnings understated O c. Investment overstated, retained earnings correct O d. Investment overstated, retained earnings overstated O e. All accounts will be fairly stated On 1/1/21, Vitale Co. invested $1,000,000 in Demo Co. for 25% of its outstanding stock. The equity method of accounting is appropriate. Demo Co. pays out 20% of net income in dividends each year. Vitale received $10,000 in Demo dividends during 2021. What was Demo's 2021 Net Income? Select one: a. $500,000 O b. $125,000 O c. $87,500 d. $200,000 O e. $111,111