On January 1 2006 Lani Company entered into a noncancelablelease for a machine to be used in its manufacturing operations. Thelease transfers ownership of the machine to Lani by the end of thelease term. The term of the lease is eight years. The minimum leasepayment made by Lani on January 1 2006 was one of eight equalannual payments. At the inception of the lease the criteriaestablished for classification as a capital lease by the lesseewere met.