Krause Company on January 1, 2018, enters into a ten-year noncancelable lease, for equipment having an estimated useful life of 10 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $4,000,000. Krauses incremental borrowing rate is 8%. Krause uses the straight-line method to depreciate its assets. The lease contains the following provisions: 1. Rental payments of $292,000 including $26,000 for property taxes, payable at the beginning of each six-month period. 2. A guaranteed residual value of $200,000 is expected at the expiration of the lease. Instructions (a) What kind of lease is this to Krause Company? (b) What is the present value of the minimum lease payments? (PV factor for annuity due of 20 semi-annual payments at 8% annual rate, 14.13394; PV factor for amount due in 20 interest periods at 8% annual rate, .45639.) (Round to nearest dollar.) (c) What journal entries would Krause record during the first year of the lease?