Meldiva Inc. has leased equipment with a fair market value of $30,000 from Fair Leasing Corporation. The present value of the lease payments is $28,000. The equipment has an economic life of ten years and the term of the lease is six years. There is no bargain purchase option. Meldiva Inc. makes monthly payments and will not own the equipment at the end of the lease. Meldiva Inc. follows ASPE. The lease will be recorded as:

a. an operating lease because there is no transfer of ownership at the end of the lease.

b. a capital lease for $28,000.

c. an operating lease because the lease payments are monthly and there is no bargain purchase option.

d. a capital lease for $30,000.