Case $15-1$ you provided involves Kerry Volcko, the director of purchasing at Watt College in Boston, Massachusetts, evaluating a proposal negotiated by Professor Arun Verma for the purchase of new computer equipment for the engineering lab. Kerry was concerned about the proposal involving a capital lease, which the university typically did not enter into. The total cost of the equipment in the lease proposal was $$570,000,$ including interest.Even though there was no policy against capital leases, the university generally avoided them due to considering them expensive and problematic. Kerry requested that Professor Verma change the lease to a purchase agreement with the equipment supplier, but Professor Verma insisted on handling the acquisition within his budget to avoid jeopardizing important research projects. As of May $19,$ Kerry had not yet signed the lease, and both Professor Verma and the equipment supplier were pressuring her to approve the contract.Kerry felt uncomfortable with the arrangement and was unsure of the action she should take. The lease proposal from Douglas Leasing outlined the terms, including an initial payment of $$130,000$ due on August $1,2022,$ followed by three annual payments of $$110,000$ each and a purchase option of $$110,000$ due on January $31,2026.$The differences between capital and operating leases were outlined in Exhibit $2,$ stating that a lease must be classified as a capital lease if certain criteria are met, such as ownership transfer at the end of the term, an option to purchase for less than fair market value, lease term exceeding $75\%$ of the property's estimated economic life, or present value of lease payments exceeding $90\%$ of the property's fair market value. Operating leases are any leases that do not meet the criteria for a capital lease.