Carla Vista Corporation has signed a $5-$year lease for machinery with a cost of $$219,600.$ The asset has an economic life of $9$ years with zero salvage value. Annual minimum lease payments made at the end of year are $$48,800$ and the discount rate is $7\%.$ No maintenance is required and there is no bargain purchase option available on the lease.

Identify whether the machinery should be treated as an operating or capital lease assuming Carla Vista follows ASPE.

The machinery should be treated as a$($n$)$

Capital lease or operating lease