Pencil Company purchased 40 percent ownership of Stylus Corporation on January 1, 20X1, for $154,000. Styluss balance sheet at the time of acquisition was as follows:

STYLUS CORPORATION
Balance Sheet
January 1, 20X1
Assets								Liabilities and Equities
Cash					$	34,000		Current Liabilities	$	37,000
Accounts Receivable						127,000		Bonds Payable		240,000
Inventory						87,000		Common Stock		196,000
Land						157,000		Additional Paid-In Capital		37,000
Buildings & Equipment	$	304,000
Less: Accumulated Depreciation		(125,000	)			179,000		Retained Earnings		74,000
Total Assets					$	584,000		Total Liabilities & Equities	$	584,000

During 20X1 Stylus Corporation reported net income of $28,000 and paid dividends of $5,000. 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 $29,000 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?