during january 2006 nobb made substantial improvements to the warehouse the cost of 604602

On January 1, 2004, Nobb Corp. signed a twelve-year lease for warehouse space. Nobb has an option to renew the lease for an additional eight-year period on or before January 1, 2008. During January 2006, Nobb made substantial improvements to the warehouse. The cost of these improvements was $540,000, with an estimated useful life of fifteen years. At December 31, 2006, Nobb intended to exercise the renewal option. Nobb has taken a full year’s amortization on this leasehold. In Nobb’s December 31, 2006 balance sheet, the carrying amount of this leasehold improvement should be

  1. $486,000
  2. $504,000
  3. $510,000
  4. $513,000