Estes Co Leased a Machine to Dains Co

Estes Co. leased a machine to Dains Co. Assume the lease payments were made on the basis that the residual value was guaranteed and Estes gets to recognize all the profits, and at the end of the lease term, before the lessee transfers the asset to the lessor, the leased asset and obligation accounts have the following balances:
If, at the end of the lease, the fair market value of the residual value is $8,800, what gain or loss should Estes record?

A) $6,480 gain
B) $7,120 loss
C) $7,200 loss
D) $8,800 gain