Totally Modern, Inc. leased a computer to a law firm, Dewey, Cheatam, and

Howe. on January $2,20$X$1.$The term of this noncancelable lease is four years. The following

information about the lease is provided:

a$.$Title to the computer does not pass to the lessee at the end of the lease term. The lease

agreement includes a guaranteed residual value of $$30,000.$

b$.$The normal selling price of the computer at January $2,20$X$1,$was $$400,000.$The cost of the

computer to Totally Modern was $$350,000.$The computer has an estimated economic life of five

years.

c$.$Totally Modern desires a rate of return of $10$percent on its investment.

d$.$Equal annual lease payments are due at the beginning of each lease year, with the first one

due on January $2,20$X$1,$when the law firm takes possession of the computer.

Instructions $-$answer all questions in the space provided.

$1.$What type of lease is this for the lessor? Discuss and apply all of the leasing criteria.