Recording Entries for Finance Lease$$No Residual, Renewal Terms

On January $1$ of Year $1,$ Lessee Inc. enters into a five$-$year equipment lease agreement. Lease payments are $$11,250,$ due annually, each January $1($first payment due immediately$).$ The lease grants the lessee an option to renew the lease for an additional three years. Lease payments adjust to current market rates for equivalent rentals at the time of renewal. Lessee Inc. is reasonably certain that it will exercise the renewal option. The estimated useful life of the equipment is $10$ years. The lessee is not aware of the implicit rate of the lease, but the lessee$$s incremental borrowing rate is $6\%.$

Required

a$.$ How would Lessee Inc. classify the equipment lease?