FUJAIRAH WOMEN CAMPUS Question 1 50 marks Company signs an agreement on January 1, 2012, to lease equipment to Raana Falcon Leasing Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 6 years. 2. The cost of the asset to the lessor is $343,000. The fair value of the asset at January 1, 2012, is $343,000. revert to the lessor at the end of the lease term at which time the asset is The asset will expected to have a residual value of $61,071, which is unguaranteed. 3. 4. Lessor desires a 10% rate of return on its investment 5. Raana Company assumes direct responsibility for all executory costs. 6. Th e agreement requires equal annual rental payments, beginning on January 1, 2012. Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by the lessor 7. Required (a) What is the nature of this lease to Falcon Company? Explain (3 marks) Calculate the amount of the annual rental payment required. (12 marks)