On January 3, 2016, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying $2,500,000. Austin decided to use the equity method to account for this investment. At the time of this investment, Gainsville's stockholder's equity was $8,000,000. Austin gathered the following information about Gainsville's assets and liabilities:

Equipment (5 year life) had a book value of $1,200,000 and a fair value of 2,000,000

For all other assets and liabilities, book value and fair value were equal. During 2016, Gainsville had a net loss of $3,000,000 and paid dividends of $1,600,000.

(a)What amount should Austin report as Investment income for 2016? (b) what is the balance investment account on December 31, 2016.? Please show work.