On December 31, 2006, Lane, Inc. sold equipment to Noll, and simultaneously leased it back for twelve years. Pertinent information at this date is as follows:

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Sales price

$480,000

Carrying amount

360,000

Estimated remaining economic life

15 years

At December 31, 2006, how much should Lane report as deferred gain from the sale of the equipment?

  1. $0
  2. $110,000
  3. $112,000
  4. $120,000