Pedro purchased 100% of the common stock of the Sanburn Company on January 1, 20X1, for $500,000. On that date, the stockholders' equity of Sanburn Company was $380,000. On the purchase date, inventory of Sanburn Company, which was sold during 20X1, was understated by $20,000. Any remaining excess of cost over book value is attributable to patent with a 20-year life. The reported income and dividends paid by Sanburn Company were as follows: 20X1 20X2 Net income $80,000 $90,000 Dividends paid 10,000 10,000 Refer to Scenario 3-1. Using the simple equity method, which of the following amounts are correct? Investment Income Investment Account Balance 20X1 December 31, 20X1 1. $80,000 $550,000 2. $80,000 $570,000 3. $70,000 $550,000 4. $70,000 $570,000