Tropical Products Inc. is in the process of negotiating a lease of equipment with a fair value of \(\$ 50,000\), and it must determine the proper lease classification. The following table describes four scenarios under negotiation.

Required 

Determine the proper classification for each of the four separate scenarios assuming that Tropical Products Inc. is the lessee.

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Ownership transfer.. Purchase option.. Option One Option Two Option Three 22 No No 22 No No 22 No No 4 3 4 5 5 Lease term length, in years Economic life of equipment, in years. Alternative use of equipment at lease end Annual lease payment. Guaranteed residual value Yes $11,000 No Implicit rate of lease Unknown to lessee Incremental borrowing rate of lessee Payment type 8% Beginning of year Option Four No Yes, for $10,000 which is a discounted price 3 5 Yes Yes $11,000 No Unknown to lessee 8% Beginning of year Yes $11,000 $15,000 8.4% 8% Beginning of year $11,000 No Unknown to lessee 8% End of year