Current Attempt in Progress

Wildhorse Co$.$ processes jam and sells it to the public. Wildhorse leases equipment used in its production processes from Windsor, Inc.

This year, Wildhorse leases a new piece of equipment from Windsor. The lease term is $5$ years and requires equal rental payments of

$$13,000$ at the beginning of each year. In addition, there is a renewal option to allow Wildhorse to keep the equipment one extra year

for a payment at the end of the fifth year of $$12,000($which Wildhorse is reasonably certain it will exercise$).$ The equipment has a fair

value at the commencement of the lease of $$65,590$ and an estimated useful life of $7$ years. Windsor set the annual rental to earn a

rate of return of $7\%,$ and this fact is known to Wildhorse. The lease does not transfer title, does not contain a bargain purchase option,

and the equipment is not of a specialized nature.

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How should Wildhorse classify this lease?

Wildhorse should classify the lease as a$/$an

lease.