Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2014, for $812,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $2.50 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:

Year	Cost to Steinbart	Transfer Price	Amount Held by Alex at Year-End (at Transfer Price)
2014	$132,440	$154,000	$38,500
2015	112,950	150,600	45,200

Inventory held at the end of one year by Alex is sold at the beginning of the next.

Steinbart reports net income of $86,750 in 2014 and $123,050 in 2015 and declares $20,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2015?

(a) $42,842.

(b) $32,042.

(c) $27,472.

(d) $47,642.