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Hull Co.leased equipment to Riggs Company on May 1, 2016.The lease expires on May 1, 2017.Riggs could have bought the equipment from Hull for $3,200,000 instead of leasing it.Hull's accounting records showed a book value for the equipment on May 1, 2016, of $2,800,000.Hull's depreciation on the equipment in 2016 was $360,000.During 2016, Riggs paid $720,000 in rentals to Hull for the 8-month period.Hull incurred maintenance and other related costs under the terms of the lease of $64,000 in 2016.After the lease with Riggs expires, Hull will lease the equipment to another company for two years.
-The income before income taxes derived by Hull from this lease for the year ended December 31, 2016, should be

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Hull's income before income taxes derived from the lease for the year ended December 31, 2016, is $296,000, computed as follows:Rentals received from Riggs Company $720,000Less: Hull's depreciation on the equipment 360,000Hull's maintenance and other related costs 64,000Income before income taxes $296,000

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