Question: 2: (14 points) B1, B3, D4 At the first day of 2021 Cairn Energy Company signed 40 years lease for a Building. The terms of

2: (14 points) B1, B3, D4 At the first day of

2: (14 points) B1, B3, D4 At the first day of 2021 Cairn Energy Company signed 40 years lease for a Building. The terms of the lease called for Cairn Energy Co. to make annual payments of $20,000 at the beginning of each year, starting January 1, 2021. The building has a book value of $240,000 (the FMV at the leasing date was $230,000) an estimated useful life of 50 years and a $40,000 unguaranteed residual value. Caim Energy Co. uses the straight-line method of depreciation for all of its plant (fixed) assets. Cairn Energy incremental borrowing rate is 10%, and the Lessor's rate is unknown. Instructions: a) What type of lease is this? Explain. (3 points) b) Compute the present value of the minimum lease payments. (4 points) c) Prepare all journal entries for Cairn Energy Co. through Jan. 1, 2021. (5 points) d) Prepare all journal entries for Cairn Energy Co. through Jan. 1, 2022. (2 points) Page3 Accounting, Finance and Banking

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