Dodge, Incorporated Acquires 15% of Gates Corporation on January 1

Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2011, for $105,000 when the book value of Gates was $600,000. During 2011 Gates reported net income of $150,000 and paid dividends of $50,000. On January 1, 2012, Dodge purchased an additional 25% of Gates for $200,000. Any excess cost over book value is attributable to goodwill with an indefinite life. The fair-value method was used during 2011 but Dodge has deemed it necessary to change to the equity method after the second purchase. During 2012 Gates reported net income of $200,000 and reported dividends of $75,000. The balance in the investment account at December 31, 2012, is

A) $370,000.
B) $355,000.
C) $305,000.
D) $400,000.
E) $105,000.