Leases telecommunications equipment from Photon Company. Assume the following data for equipment leased from Photon Company. The lease term is $5$ years and requires equal rental payments of $$31,000$ at the beginning of each year. The equipment has a fair value at the commencement of the lease of $$150,000,$ an estimated useful life of $8$ years, and a guaranteed residual value at the end of the lease of $$15,500.$ Photon set the annual rental to earn a rate of return of $6\%,$ and this fact is knbown to Callaway. The lease does not transfer title or contain a bargain purchase option, and is not a specialized asset.

How should Callaway classify this lease?