Pharoah Co. processes jam and selts it to the public. Pharoah leases equipment used in its production processes from Sheridan, Inc. This year, Pharoah leases a new piece of equipment from Sheridan. The lease term is 5 years and requires equal rental payments of $19,000 at the beginning of each year. In addition, there is a renewal option to allow Pharoah to keep the equipment one extra year for a payment at the end of the fifth year of $12000 (which Pharoah is reasonably certain it will exercise). The equipment has a fair value at the commencement of the lease of $93,804 and an estimated uscfullife of 7 years. Sheridan set the annual rental to eam a rate of return of 6%, and this fact is known to Pharonh. The lease does not transfer title, does not contain a bargain purchase option, and the equipment is not of a specialized nature. Click here to view factor tables. How should Pharoah classify this lease? Pharoah should classify the lease as a/ar lease