Gerbil Leasing Company agrees to lease equipment to Playa Corporation on January 1, 2014. The following information relates to the lease agreement.

- The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years.

- The cost of the machinery is $525,000, and the fair value of the asset on January 1, 2014, is $700,000.

- At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Joseph estimates that the expected residual value at the end of the lease term will be $50,000. Playa amortizes all of its leased equipment on a straight-line basis.

- The lease agreement requires equal annual rental payments, beginning on January 1, 2014.

- The collectibility of the lease payments is probable.

- The lessor's implicit rate is unknown.

REQUIRED: Please show the calculation(s)/discussion of the test you use to answer the following questions:

1) What type of lease is this for the lessee?

2) What type of lease is this for the lessor?