Each of the four independent situations below describes a lease requiring annual lease payments of $30,000.

Situation
	1	2	3	4
Lease term (years)	4	4	4	4
Assets useful life (years)	6	6	5	6
Assets fair value	$132,000	$123,000	$129,000	$117,000
Bargain purchase option?	No	No	Yes	No
Annual lease payments	Beg. of yr.	Beg. of yr.	End of yr.	End of yr.
Lessors implicit rate (known by lessee)	5%	5%	7%	6%
Lessees incremental borrowing rate	5%	5%	5%	5%

For each situation, determine the appropriate lease classification by the lessee and indicate why