1. No deferred tax asset was recognized in the Year 1 financial statements by the Chaise Company when a loss from discontinued segments was carried forward for tax purposes. Chaise had no temporary differences. The tax benefit of the loss carried forward reduced current taxes payable on Year 2 continuing operations. The Year 2 financial statements would include the tax benefit from the loss brought forward in

1. Gain or loss from discontinued segments.

2. Income from continuing operations.

3. Cumulative effect of accounting changes.

4. Owners' equity.

2. Walker Company is a manufacturer and lessor of computer equipment. What should be the nature of its lease arrangements with lessees if the company wishes to account for its lease transactions as sales-type leases? (short answer)