Ouestion 3 (Lease with initial direct costs - from lessor's perspective): ( 20 marks) On January 1, 2020, No. 1 Leasing Company leased equipment to Maria Corporation for a 5-year period ending December 31,2024 , at which time possession of the leased equipment will revert back to No. 1 Leasing Company. The lease is noncancelable. The lease terms do not provide for transfer of legal title, do not contain a bargain purchase option, and do not require the lessee to guarantee a residual value. Initial direct costs of negotiating and consummating the completed lease transaction incurred by No. 1 Leasing Company on January 1,2020 were $12,000. The equipment, which has expected useful life of 5 years and expected residual value of $25,000, cost No. 1 Leasing Company $250,000 to manufacture. Its normal sales price was $330,000 on January 1,2020 . Equal payments under the lease are $72,583 and are due on January 1 of each year. The first payment was made on January 1, 2020. Collectibility of the remaining lease payments is reasonably assured, and No. 1 Leasing Company has no material cost uncertainties. Maria's incremental borrowing rate is 10%. Maria knows that the interest rate implicit in the leasing payments is 8%. Both companies use straight-line depreciation. Required: a. What is the nature of this lease to No. 1 Leasing Company (the lessor)? Explain. (6 marks) b. Prepare the appropriate entries for No. 1 Leasing Company (the lessor) to record the lease and the lease payment at its inception. Show calculations. (10 marks) c. Determine the total amount of lease-related income No. 1 Leasing Company (the lessor) will report for the year 2020. (4 marks)