On 1 January 20X1, Canada Leasing Inc. acquired an asset on behalf of Magnum Ltd. for $100,000. Canada Leasing and Magnum enter into a six-year lease for the asset, effective 1 January 20X1, with equal payments made by Magnum at the beginning of each lease year. Canada Leasing will earn 8% (before taxes) on the lease. Canada Leasing has a 31 December fiscal year-end.

Required:
1. Determine the amount of each lease payment.
2. Provide the journal entries that would appear in Canada Leasing Inc.’s accounts for 20X1, 20X2, and 20X3, using the net method of recording.
3. Repeat requirement 2, but use the gross method of recording the lease.
4. What amount(s) relating to the lease, reported using the net method, will be shown on Canada Leasing Inc.’s SFP on 31 December 20X3?