Parnell Industries Sold a Copy Machine to Ranger Inc -
If Parnell Industries Is Certain That It Will

Parnell Industries sold a copy machine to Ranger Inc. on January 1, 2012. The sale price of the machine was $4,000,000 and the machine cost $3,200,000 for Parnell to manufacture. Ranger will make four payments at the end of each year, beginning with 2012, of $1,261,883 each. The four payments of $1,261,883 when discounted at 10% have a present value of $4,000,000. An amortization table appears below:
$\begin{array}{c}\begin{array}{|l|} \hline\\ \hline\\ \hline \text {Year}\\ \hline2012\\ \hline2013\\ \hline2014\\ \hline2015\\ \hline\\ \hline\end{array}\begin{array}{l|} \hline \\ \hline \text {Note Rec.}\\ \hline \text {Jan. 1}\\ \hline \$ 4,000,000\\ \hline 3,138,117 \\ \hline 2,190,046 \\ \hline 1,147,168 \\ \hline \\ \hline \end{array}\begin{array}{l|}\hline\text { Interest } \\\hline \text { Revenue } \\\hline \text { at } 10 \% \\\hline \$ 400,000 \\\hline 313,812 \\\hline 219,005 \\\hline 114,716 \\\hline \$ 1,047,533\\\hline \end{array}\begin{array}{l|}\hline\\\hline\text {Cash Pint}\\\hline\text {Rec'd}\\\hline \$ 1,261,883 \\\hline 1,261,883 \\ \hline 1,261,883 \\ \hline1,261,883 \\ \hline\$ 5,047,532\\ \hline \end{array}\begin{array}{l|}\hline\text {Repay.}\\\hline\text {of}\\\hline\text {Princ.}\\\hline\$ 861,883 \\\hline 948,071 \\\hline 1,042,878 \\\hline 1,147,168 \\\hline\$ 4,000,000 \\\hline\end{array}\begin{array}{l|}\hline\\\hline\text {Note Rec.}\\\hline\text {Dec. 31}\\\hline \$ 3,138,117 \\\hline2,190,046\\\hline 1,147,168\\\hline0\\\hline \\\hline \end{array}\end{array}$
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If Parnell Industries is certain that it will collect all four payments from Ranger Inc. what amount of gross profit should Parnell recognize in 2012 from the sale?

A) $0
B) $861,883
C) $172,377
D) $800,000