Maywood Company enters into a property (land and building) lease with Oak Lawn Company. The following summarizes information about the lease and the leased asset.
• Lease term – 10 years
• Renewal option – Five 5-year renewal options. If exercised, the annual lease payments are reset to then current market rents.
• Economic life of the property – 40 years
• Fair value of the leased property – $5,000,000
• Purchase option – Maywood Company has an option to purchase the property at the end of the lease term for $3,000,000.
• Annual lease payments – The first annual lease payment is $500,000, with increases of 3% per year thereafter.
• Payment date – Annually on January 1
• Incentive – Oak Lawn Company gives Maywood Company a $200,000 incentive for entering into the lease (payable at beginning of year 2), which is to be used for normal tenant improvements
• Discount rate – Since both the lease payments required during the lease and the purchase option price are fixed, Maywood Company can combine these cash flows with its estimate of the property’s fair value to determine that the interest rate Maywood Company incurs during the lease is 9.04%. However, because Maywood Company cannot be sure of Oak Lawn Company’s estimate of fair value or whether Oak Lawn realized any investment tax credits with respect to the property, this rate is not the rate implicit in the lease. Consequently, Maywood Company compares the rate to other evidence of its borrowing rates in similar circumstances and concludes that this rate is a reasonable estimate of its incremental borrowing rate
• Title to the property remains with Oak Lawn Company upon lease expiration
• Maywood Company does not guarantee the residual value of the real estate asset
• Maywood Company pays for all maintenance, taxes, and insurance on the property separate from the lease
• There are no initial direct costs incurred by Maywood Company

Required:
a. How should Maywood Company classify the lease?
b. How would Maywood Company measure and record this lease at its inception?
c. How would Maywood Company measure the right-of-use asset and lease liability over the lease term?