Pencil Company purchased 30 percent ownership of Stylus Corporation on January 1, 20X1, for $163,000. Styluss balance sheet at the time of acquisition was as follows:

STYLUS CORPORATION
Balance Sheet
January 1, 20X1
Assets								Liabilities and Equities
Cash					$	42,000		Current Liabilities	$	38,000
Accounts Receivable						124,000		Bonds Payable		245,000
Inventory						84,000		Common Stock		186,000
Land						154,000		Additional Paid-In Capital		38,000
Buildings & Equipment	$	316,000
Less: Accumulated Depreciation		(137,000	)			179,000		Retained Earnings		76,000
Total Assets					$	583,000		Total Liabilities & Equities	$	583,000

During 20X1 Stylus Corporation reported net income of $25,000 and paid dividends of $8,000. The fair values of Styluss assets and liabilities were equal to their book values at the date of acquisition, with the exception of buildings and equipment, which had a fair value $34,000 above book value. All buildings and equipment had remaining lives of five years at the time of the business combination. The amount attributed to goodwill as a result of its purchase of Stylus shares is not impaired. Required: a. What amount of investment income will Pencil Company record during 20X1 under equity-method accounting?

b. What amount of income will be reported under the cost method?

c. What will be the balance in the investment account on December 31, 20X1?

Cost-method Accounting:

Equity-method Accounting: