On January 1, 2020, Formax Distribution Inc. signs as agreement to lease a conveyor system from SageTech Corp for 3 years. The Following information relates to this agreement.

Conveyor system has a fair value of $63,000 and an estimated economic life of 5 years.

Conveyor system will revert back to SageTech at the termination of the lease. No bargain purchase option offered.

Conveyor system is a standardized system that can be used by any distributors.

The agreement requires equal annual rental payments of $20,289 (including executory cost of $2,000) to SageTech at the beginning of each year, starting on January 1, 2020.

Suppose Formax's (the lessee) discount rate is 5%. The SageTech's (the lessor) implicit rate is 4% and is unknown to Formax. How would Formax classify the agreement? (Hint: The present value of an annuity due of 1 for 3 years at 5% is 2.85941; The present value of an annuity due of 1 for 3 years at 4% is 2.88609)?

A: Finance Lease

B: Operating Lease

C: Leveraged Lease

D: Sales-type Lease