On January 1, 20X8, Polo Corporation acquired 75 percent of Stallion Company's voting common stock for $300,000. At the time of the combination, Stallion reported common stock outstanding of $200,000 and retained earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Stallion's net assets approximated market value except for patents that had a market value of $50,000 more than their book value. The patents had a remaining economic life of ten years at the date of the business combination. Stallion reported net income of $40,000 and paid dividends of $10,000 during 20X8.

39) Based on the preceding information, what balance will Polo report as its investment in Stallion at December 31, 20X8, assuming Polo uses the equity method in accounting for its investment?

A) $318,750

B) $317,500

C) $330,000

D) $326,250

Please explain clearly using math calculations how the answer is 318,750