Kawhi Consulting leased machinery to Red Inc. on July 1, 2018. The lease was recorded as a sales type lease. The present value of the lease payments discounted at 9% was $760,655. Ten annual lease payments of $62,565 are due each July 1 beginning July 1, 2018. Kawhi had manufactured the equipment at a cost of $475,000. The total increase in earnings (pretax) on Kawhis December 31, 2018, income statement would be: