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JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd

JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd $16m and has an expected useful life of 12 years. Its selling price is $22.4m. The present value of the lease payments is $20.4m. The first payment was made at the commencement of the lease.

Required: How should JK Ltd classify this list and why?

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