I dont underestand the part that i bolded in the word file . (from where that 6/12 came ? ) Thank yo

I dont underestand the part that i bolded in the word file . (from where that 6/12 came ? ) Thank you , Pr. 21-118—Lessee accounting—capital lease. Eubank Company, as lessee, enters into a lease agreement on July1, 2018, for equipment. The following data are relevant to thelease agreement: 1.   The term of thenoncancelable lease is 4 years, with no renewaloption. Payments of $978,446 are due on July 1 of each year. 2.   The fair value of theequipment on July 1, 2018 is $3,500,000. The equipment has aneconomic life of 6 years with no salvagevalue. 3.   Eubank depreciatessimilar machinery it owns on the sum-of-the-years’-digitsbasis. 4.   The lessee pays allexecutory costs. 5.   Eubank’s incrementalborrowing rate is 10% per year. The lessee is aware that the lessorused an implicit rate of 8% in computing the lease payments(present value factor for 4 periods at 8%, 3.57710; at 10%,3.48685). Instructions (a)    Indicate thetype of lease Eubank Company has entered into and what accountingtreatment is applicable. (b)    Prepare thejournal entries on Eubank’s books that relate to the leaseagreement for the following dates: (Round all amounts to thenearest dollar. Include a partial amortization schedule.)         1.   July 1, 2018.         2.   December 31, 2018.         3.   July 1, 2019.         4.   December 31, 2019. Ans: NA, LO: 2, Bloom: AP, Difficulty:Difficult, Min: 20-25, AACSB: Reflective, AICPA BB: None, AICPA FN:Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS:None Solution 21-118 (a)    Capitalizedamount:         $978,446 × PV of anordinary annuity for 4 periods at 8%         $978,446 × 3.57710 =$3,500,000         Because the presentvalue of the lease payments ($3,500,000) equals the fair value,$3,500,000, of the leased property, it is a capital lease and mustbe accounted for under the capital lease method. (b)   1.                                                           July 1, 2018               LeasedEquipment…………………………………………………………..3,500,000                           LeaseLiability………………………………………………………                      2,521,554                           Cash…………………………………………………………………..                         978,446         2.                                                    December 31, 2018               DepreciationExpense……………………………………………………..     700,000                           Accumulated Depreciation—Capital Leases                                [($3,500,000 × 4/10) ×6/12]……………………………….                         700,000               Interest Expense ($201,724 ×6/12)…………………………………..     100,862                           InterestPayable……………………………………………………                         100,862 . . .

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