intermediate 2 Accounting

• Total package of equipment leased has a fair market value of $4,800,000
• Lessor management statued that they used a rate of return of 6% for their calculations, based on an eightyear term and a guaranteed minimum value for the equipment at the termination of the lease of $600,000
• First payment of $672,030 was paod on July 2 when the lease was signed, with subsequent payments due on July 1^st each year
• Lease payments are included in operating expenses by Appexia as they are paid
• Appexia management believes that, at a minimum, at the termination of these lease the equipment could be sold for an expected value of $440,000. Appexia uses the straightline method of depreciation for its property, plant, and equipment

Journal Entries and Calculations