On January 1, 2018 Apparel, Inc. acquired 30% of the outstanding common stock of Silk Co. for $1,000,000. This investment gave Apparel the ability to exercise significant influence. Silks assets on that date were recorded at $5,500,000 with liabilities of $3,500,000. Any excess of cost over book value of Apparels investment was attributed to unrecorded patents having a remaining useful life of five years. In 2018, Silk reported net income of $500,000 and paid dividends of $150,000.

a. What was the reported balance of Apparel's Investment in Silk Co. at December 31, 2018?

b. What amount of Equity in Investee Income should Apparel, Inc. report in its 2018 income statement?