On December 31, 2018, Concord Corporation is in financial difficulty and cannot pay a note due that day. It is a $2800000 note with $280000 accrued interest payable to Pharoah, Inc. Pharoah agrees to accept from Concord equipment that has a fair value of $1460000, an original cost of $2500000, and accumulated depreciation of $1160000. Pharoah also forgives the accrued interest, extends the maturity date to December 31, 2021, reduces the face amount of the note to $1340000, and reduces the interest rate to 5%, with interest payable at the end of each year.

Concord should recognize a gain or loss on the transfer of the equipment of

$300000 gain.

$1040000 loss.

$0.

$120000 gain.