Pencil Company purchased $40$ percent ownership of Styles Corporation on January $1,20$X$1,$ for $$150,000.$ Style$$s balance sheet at the time of acquisition was as follows:

Stylus Corporation

Balance Sheet

January $1,20$X$1$

Cash $30,000$ Current Liabilities $40,000$

Accounts Receivables $120,000$ Bonds Payable $200,000$

Inventory $80,000$ Common Stock $200,000$

Land $150,000$ Additional Paid$-$In Capital $40,000$

Buildings & Equipment $300,000$

Less: Accumulated

Depreciation $(120,000)180,000$ Retained Earnings $80,000$

Total Assets $560,000$ Total Liabilities & Equities $560,000$

During $20$X$1$ Stylus Corporation report net income of $$30,000$ and paid dividends of $$9,000.$ The fair values of Stylus$$s assets and liabilities were equal to their book values at the date of acquisition, with the exception of buildings and equipment, which had a fair value $$35,000$ above the book value. All buildings and equipment had remaining lives of five years and the time of the business combination. The amount attributed to goodwill as a result of its purchase of Styles shares is not impaired.

Required

a$.$ What amount of investment income will Pencil Company record during $20$X$1$ 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 $31,20$X$1,$ under $(1)$ cost$-$method and $(2)$ equity$-$method accounting?