On January 1, 2022, Kellogg Associates Limited ("KAL") bought 4,000 common shares of Pinewood Enterprises ("PE") for $40,000 cash. KAL accounts for these securities using the equity method. The share price of PE closed at $15 on December 31, 2022, and at $18 on December 31, 2023. KAL received $1,500 cash dividends from PE on April 1, 2022, and $500 cash dividends from PE on April 1, 2023. PE has 10,000 shares outstanding, and reported Net Income of $25,000 for 2022 and Net Income of $40,000 for 2023. On November 1, 2023, KAL sold 500 shares of PE for $8,000. 

How do these transactions affect the Net Income reported by KAL for the year ending December 2023? Assume that KAL does not pay any taxes. Hint: Assume that both KAL and PE close their books in December and, further, KAL recognizes equity income at the end of the fiscal year based on the proportion of the outstanding shares of PE held on that closing date

Answer rating: 100% (QA)

Heres how the transactions affect KALs Net Income for the year ending December 2023 1 Initial In... View the full answer