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What should be the income before income taxes

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Question - Maris Co. purchased a machine on January 1, 2018, for $2,000,000 for the express purpose of leasing it. The machine is expected to have a 5-year life, no salvage value, and be depreciated on a straight-line monthly basis. On April 1, 2018, under a cancelable lease, Maris leased the machine to Dunbar Company for $600,000 a year for a 4-year period ending March 31, 2022. Maris incurred total maintenance and other related costs under the provisions of the lease of $20,000 relating to the year ended December 31, 2018. Harley paid $600,000 to Maris on April 1, 2018.

Required - Under the operating method, what should be the income before income taxes derived by Maris Co. from this lease for the year ended December 31, 2018?

Reference no: EM132617818

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