Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2017, for $105,000 when the book value of Gates was $600,000. During 2017 Gates reported net income of $150,000 and paid dividends of $50,000. On January 1, 2018, Dodge purchased an additional 25% of Gates for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2017 but Dodge has deemed it necessary to change to the equity method after the second purchase. During 2018 Gates reported net income of $200,000, and reported dividends of $75,000.

The income reported by Dodge for 2017 with regard to the Gates investment is:

A) $100,000.

B) $150,000.

C) $7,500.

D) $15,000.

E) $22,500.