SuperByte Corporation Superbyte Corporation sells photographic equipment. Superbyte leases equipment to Laguna Madre Company on January 1 of the current year. The cost to manufacture the equipment was $12 million. The lease agreement between SuperByte and Laguna Madre had the follow terms:

1. The lease is noncancellable.

2. The lease has no residual value or bargain purchase option.

3. The lease term is 8 years; payments are made semiannually.

4. Depreciation is recorded each December 31 using the straight-line approach.

5. The economic life of the equipment is 8 years.

6. The lessee's incremental borrowing rate and the implicit interest rate are both 12% annually.

7. The lease payments are $1,493,617 semiannually. The first payment is due at the inception of the lease; subsequent payments are made every July 1 and January 1.

8. The fair value of the equipment at the inception of the lease is $16,000,000.

Refer to superbyte Corporation.

Superbyte Corporation would account for this lease as _____.

A) a direct financing lease B) a sales-type lease C) a capital lease D) an operating lease