Tom Co. leased equipment it had manufactured to Jerry Corp. on January 1, year 1, for a 10-year period expiring December 31, year 10. Equal payments under the lease are $ 450,000 and are due on January 1 of each year. The first payment was made on January 1, year 1. The list selling price of the equipment is $ 3,300,000 and its carrying value on Tom’s books is $ 2,950,000. The lease is appropriately accounted for as a sales- type (finance) lease. The present value of the lease payments at an imputed interest rate of 9% (Tom’s incremental borrowing rate) is $ 3,150,000. What amount of profit on the sale should Tom Co. report for the year ended December 31, year 1?
a. $ 0
b. $ 150,000
c. $ 200,000
d. $ 350,000