Hull Co. bought equipment and immediately leased it to Riggs Company on May 1, 2021. At that time the collectibility of the lease payments was not probable. The lease expires on May 1, 2022. Riggs could have bought the equipment from Hull for $5,600,000 instead of leasing it. Hulls accounting records showed a book value for the equipment on May 1, 2021, of $4,900,000. Hulls depreciation on the equipment in 2021 was $630,000. During 2021, Riggs paid $1,260,000 in rentals to Hull for the 8-month period. Hull incurred no maintenance or other related costs under the terms of the lease in 2021. After the lease with Riggs expires, Hull will lease the equipment to another company for two years.

The income before income taxes derived by Hull from this lease for the year ended December 31, 2021, should be

		$518,000.
		$630,000.
		$1,148,000.
		$1,260,000.

Please explain in detail! Thank you. The answer I chose was 1,260,000 BUT it was wrong!