2. On January 1, 2020, Firm Lessor leased a building to Firm Lessee. The relevant information related to the lease is as follows.

1) The lease arrangement is for 2 years.

2) Equal rental payments are due on January 1 of each year, beginning in 2020.

3) The buildings fair value at commencement of the lease is $100,000. The building is depreciated on a straight-line basis. Its estimated economic life is 4 years with salvage value of $25,000 at the end of the lease and $0 at the end of the economic life.

4) The lease contains no renewal options. The building reverts to Firm Lessor at the termination of the lease.

5) Both firms use the discount factor of 10%. 6) Both the lessor and the lessee are on a calendar-year basis.

(a) Discuss whether this is an operating lease.

(b) Prepare the journal entries that Firm Lessee should make in 2020

For the dates 1/1/2020, 1/1/2020, 1/1/2021 & Include Lease Payment, Interest, Reduction of Lease Liability, Lease Liability

(c) Prepare the journal entries that Firm Lessor should make in 2020.