Lion Company Leased Equipment to Its Wholly Owned Subsidiary, Tiger

Lion Company leased equipment to its wholly owned subsidiary, Tiger, Inc., on July 1, 20X8. The lease is for a 10-year period, the useful life of the asset. The first of 10 equal annual payments of $600,000 was made on July 1, 20X8 and established a list selling price of $3,900,000 on the equipment. Assume that on July 1, 20X8, the present value of the rent payments over the lease term discounted at 12% was $3,797,000. The book value of the asset is $3,100,000. What is the profit on the sale that Lion should recognize on the consolidated financial statements for the years ended December 31, 20X8 and 20X9?

A) $800,000 and $0
B) $697,000 and $80,000
C) $80,000 and $80,000
D) $34,850 and $69,700