Obtaining the optimum chain line
We can make this easy... Lets assume your frame is totally straight and not bent in anyway.  

Measure front chainline.  Chainline is the distance the chain is from the bike's centerline.  You will need an inexpensive machinist's scale .  A machinist scale is just a small 6" long ruler. On a machinist's scale the zero mark is exactly at the edge of the scale. 



Measure the front chainline from the edge of the seat tube.  To that number add the radius of the seat tube.  My seat tube is 28mm in diameter, half of that is the radius. My front chainline is at 14 + 34 = 48mm 



For the rear chainline you measure from the inner edge of the dropout to the gear. You know the width of your rear hub (135mm) and you subtract the measurement.  (oops.. my rear hubs are 135mm yours are 120mm, right?  Obviously you should use your measurements! ) In my case, the chainline to that center gear is 135/2 - 24.5mm (from photo) = 43mm   Remember the chainline is the distance between the chain and the CENTER of the bicycle.  

Obviously my bike is using a derailleur so I'm not freaking out about a slight mismatch. 

Does that help?  If you know where you are, you can then make changes to the front crankset with shims to adjust chainline a bit. Depending on which hubs you use, you can do some spacing work at the rear as well.  Easiest combo is a multigear hub used for a single speed with a Surly hub spacer kit.  That makes it all easy.  

That cheap machinist scale takes all the guesswork out of the conversation.  Do note, because of how cranksets mate to the crankarm and bottom bracket, its almost impossible to pre-determine chainline from parts sitting on a table. You have to install them on a bike to the correct installation torque, then do your measurements, then take it all apart to make adjustments as necessary.

And Sheldon Brown, although he has passed away now (sigh), is still your friend. 

http://sheldonbrown.com/chainline.html

One more comment: Are you really trying to use a 120mm wide rear hub on a 135mm frame?  I don't think that's a clever idea.  5mm off, okay.  That far off, you risk bending the frame.  Yes, you could convert that 120mm wide rear hub to an effective 135 with spacers and a long axle.  If you are going to do that please purchase SOLID axles intended for a 135 hub.  With the loading from a 120mm wide hub a hollow skewer axle probably won't cut it.