On December $31,2020,$ Reagan Inc. signed a lease with Silver Leasing Co$.$ for some equipment having a seven$-$year useful life. The lease payments are made by Reagan annually, beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December $31,2026.$ There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease.

$$

Reagan's lease amortization schedule appears below:

Dec. $31$

Payments

InterestDecrease in

BalanceOutstanding

Balance$2020$$$519,1152020$$$90,000$$$90,000429,1152021$$$90,000$$$17,16572,835356,2802022$$$90,00014,25175,749280,5312023$$$90,00011,22178,779201,7522024$$$90,0008,07081,930119,8222025$$$90,0004,79385,20734,6152026$$$36,0001,38534,6150$

In this situation, Reagan:

is the lessor in a finance lease.

is the lessee in a sales$-$type lease.

is the lessee in a finance lease.

is the lessor in a sales$-$type lease.