On January 1 2010 Carey Inc. entered into a noncancellable agreement agreeing

On January 1 2010 Carey Inc. entered into a noncancellable agreement agreeing to pay $3500 at the end of each year for four years to acquire a new
computer system having a market value of $10200. The expected useful life of the computer is also four years and the computer will be depreciated on a
straight line basis with no salvage value. The interest rate used by the lessor to determine the annual payments was 14 %. Under the terms of the lease Carey
inc. has an option to purchase the computer for $1 on January 1 2014.

Explain why Carey inc. should account for the lease as a capital lease rather then an operating lease.