Holly Company (lessor) agrees to lease equipment to Grant Company (lessee) on January 1, 2022, on a noncancelable lease. The following information relates to the lease agreement. a. The term of the lease is 8 years with no renewal option and no bargain purchase option. The equipment is expected to have an economic life of 10 years. b. The cost of the equipment is $620,000, and the fair value of the asset on January 1, 2022, is $860,000. C. At the end of the lease term, the equipment reverts to the lessor. d. The equipment has an unguaranteed residual value of $60,000. e. The lease agreement requires equal annual rental payments, beginning January 1, 2022. f. The collectability of the lease payments is reasonably predictable. g. Holly desires an 8% rate of return on its investments. Grant's incremental borrowing rate is 10%. The lessor's implicit rate is unknown. Instructions: 1. What type of lease is this to Grant? Why? 2. What type of lease is this to Holly? Why? 3. Calculate the amount of the annual rental payment required by the lease. 4. Prepare the journal entry or entries for Grant for 2020. 5. Prepare the January 1, 2022, journal entry for Holly.