Lessee Inc. is considering the following lease. The equipment to be leased has a fair value of $100,000.

	Lease Information
Ownership of equipment transfers to lessee at lease-end	No
Lease includes a purchase option	No
Length of lease term	5
Economic life of the equipment	8
Alternative use of the equipment at lease-end	Yes
Annual lease payment, first payment due at end of each period.	$21,500
Guaranteed residual value	$20,000

Lessee Inc.s incremental borrowing rate is 7%. The lessee estimates an expected fair value of only $12,000 of the equipment at lease-end based on its expected usage.

In determining whether to classify this lease as finance or operating, how many lease classification criteria would this meet for Lessee Inc?

0

3

2

1