On 15 March 2023, Edaby Ine. (Lessor) enters into an arrangement with Telemin (Lessee) to lease some electronic equipment. The lease term is 4 years, and payments of $5,230 are due on 1 April each year. The rate implicit in the lease is 8.8%. The equipment has a 10-year useful life. The estimated fair value of the equipment is $35,000. At the end of the lease term, the asset reverts to Edaby Inc.

Required:

1. Determine how to classify each type of lease: operating, financing, or

manufacturer/dealer. Explain your reasoning.

2. Prepare the journal entries for the first year of the lease, assuming each company has a 31 December year-end. For financing-type leases, use the net method.

3. Explain the accounting under ASPE.