Jordin is an equipment dealer that occasionally uses leasing as a means of selling its products. On 1 January 20X1, Jordin leased equipment to Easten Corp. The lease term was four years with annual lease payments of $5,769 to be paid on each 31 December. The equipment has an estimated zero residual value at the end of the lease term. The equipment was carried in Jordin’s accounts at a cost of $15,000. Jordin expects to collect all rentals from Easten, and there were no material cost uncertainties at the inception of the lease. The implicit interest rate in the lease was 11%.

Required:
1. Why is this a manufacturer or dealer lease for Jordin?
2. How much is the gross profit or loss recognized by Jordin? What is the finance revenue recognized over the life of the lease?
3. Assume that the implicit interest rate is 4% (not 11%). How much is the gross profit or loss recognized by Jordin? What is the finance revenue recognized over the life of the lease?
4. Provide the entries made by Jordin (based on the 11% rate) at the inception of the lease.
Use the gross method.
5. Based on requirement 4, show all lease-related accounts as they would appear in the SFP and SCI of the lessor at 31 December 20X1, for the year then ended. The lessor’s SFP is unclassified.