USE THE FOLLOWING INFORMATION FOR QUESTIONS 12, 13, AND 14….

USE THE FOLLOWING INFORMATION FOR QUESTIONS 12, 13, AND 14. On Jаnuаry 1, 2021, Pаcific Airways agreed tо lease a plane frоm Tital Technоlogies for 12 years. The lease agreement requires annual lease payments of $425,000 at the beginning of each year. The lease does not transfer ownership, nor does it contain a purchase option likely to be exercised, and it does not involve a specialized asset (i.e., it has alternative use). The plane cost $4,000,000, has a fair value of $3,500,000 at the commencement of the lease, an estimated economic life of 20 years, and an unguaranteed residual value of $3,000,000. Assume the implicit rate Titan Technologies uses is 9%, and Pacific knows that rate. Also, assume that Pacific’s incremental borrowing rate is 10%.Part A. Determine the classification of this lease for Pacific Airways.