Kross Company purchases an equity investment in Penno Company at a purchase price of \$2.5 million, representing \(40 \%\) of the book value of Penno. During the current year Penno reports net income of \(\$ 300,000\) and pays cash dividends of \(\$ 100,000\). At the end of the year, the fair value of Kross investment is \(\$ 2.65\) million. What amount of income does Kross report relating to this investment in Penno for the year? Explain.