Flores Digital Solutions signed a four-year lease at the beginning of the current year. The leased equipment has an economic life of eight years and a fair value of $ 1,980.

Terms of the Lease

Under the terms of the lease, Flores is required to pay $ 530 at the beginning of each year. There is no purchase option and Flores must return the equipment at the end of the lease term. Flores does not know the lessor's implicit rate, but recently borrowed under a four-year loan agreement at 5 %.

Using the Future & Present Value Tables

Should Flores account for this lease as an operating or a capital lease?

Before completing the requirement, identify the present value of the lease payments.

The present value (PV) of the payments due under the lease is $