On 1/1/20, X Company purchases 35% of Z Company outstanding common stock for $700,000. Assume that the investment qualifies as one where X exerts significant influence. Also on 1/1/20, Z Companys book value of equity is $2,000,000. Any fair value book value difference is attributable to a patent with a 10-year remaining life on 1/1/20. During 2020, Z reports income of $300,000 and pays a $100,000 dividend.

In 2020, Z sells $50,000 cost inventory to X for a 20% mark up on Cost. At the end of 2020, X has 40% of the inventory on its books.

a. What is Xs investment income for 2020?

b. If Z reports income of $400,000 income for 2021 and X has sold all of the intercompany inventory on-hand at 12/31/20, what is X's investment income for 2021?