Problem 15-3 Direct financing and sales-type lease; lessee and lessor [LO15-3, 15-5, 15-6] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $1,590,000 and leased it to Mid- South Urologists Group, Inc., on January 1, 2016. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Lease Description: Quarterly lease payments Lease term No residual value; no BPO Economic life of lithotripter Implicit interest rate and lessee's incremental borrowing rate Fair value of asset $103,760-beginning of each period 5 years (20 quarters) 5 years 12% $1,590,000 Collectibility of the lease payments is reasonably assured, and there are no lessor costs yet to be incurred. Required 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? Mid-South Urologists Group Physicians' Leasing