Task 2 - Lease Accounting (5 Marks) Oman ORIX Leasing Company SAOG (OOLC), a subsidiary of ORIX Corporation signed a lease agreement with Salam Air on January 2019. The leasing company will provide an aircraft on Icase to Salam Air according to following conditions: a) The term of lease is 5 years. The Lease agreement is non-cancelable and requiring equal rental payment of 1,000,000 OMR at the beginning of cach year (Annuity due basis) b) The Air-craft has a fair value at the time of Lease Agreement was around OMR 40 million and an economic life of 5 years and no residual value. c) Salam Air pays all the executory costs directly to the third party except for the property tax of OMR 3000 per year which is included as a part of its annual payment to OOLC. d) Salam Air's incremental borrowing rate is 12% per year a) Salam Air depreciates similar aircraft that it owns at a straight ling method depreciation. f) The targeted rate of return expected by the lessor is 10%. The fact is known to the lessee. Required 1) Identify the type of lease both the companies have entered into. 2) Write journal entry for the type of lease. 3) Prepare first lease payment schedule. Task 2 - Lease Accounting (5 Marks) Oman ORIX Leasing Company SAOG (OOLC), a subsidiary of ORIX Corporation signed a lease agreement with Salam Air on January 2019. The leasing company will provide an aircraft on Icase to Salam Air according to following conditions: a) The term of lease is 5 years. The Lease agreement is non-cancelable and requiring equal rental payment of 1,000,000 OMR at the beginning of cach year (Annuity due basis) b) The Air-craft has a fair value at the time of Lease Agreement was around OMR 40 million and an economic life of 5 years and no residual value. c) Salam Air pays all the executory costs directly to the third party except for the property tax of OMR 3000 per year which is included as a part of its annual payment to OOLC. d) Salam Air's incremental borrowing rate is 12% per year a) Salam Air depreciates similar aircraft that it owns at a straight ling method depreciation. f) The targeted rate of return expected by the lessor is 10%. The fact is known to the lessee. Required 1) Identify the type of lease both the companies have entered into. 2) Write journal entry for the type of lease. 3) Prepare first lease payment schedule