Puff Co. acquired 40% of Straw Inc.'s voting common stock on January 2, Year 1 for $400,000. The carrying amount of Straw's net assets at the purchase date totaled $900,000. Fair value equaled carrying amounts for all items except equipment, for which fair values exceeded carrying amounts by $100,000. The equipment has a 5 year life. During year 1, Straw reported net income of $150,000. What amount of income from this investment should Puff report in its Year 1 Income Statement?

Can you please explain this question step-by-step as well as the use of the equity method please (give an example). thanks.