On January 1, 2023, Hunter Ltd. entered into an agreement to lease a truck from Situ Ltd. Both Hunter and Situ use IFRS. The details of the agreement are as follows: Carrying value of truck for Situ $20,691 Fair value of truck $20,691 Economic life of truck 5 years Lease term 3 years Rental payments (at beginning of each month) $620 Executory costs included in rental payments each month for insurance $20 Incremental borrowing rate for Hunter 12% Hunter expects to pay Situ $3,500 under a residual value guarantee for the truck. Additional information: There are no abnormal risks associated with the collection of lease payments from Hunter. There are no additional unreimbursable costs to be incurred by Situ in connection with the leased truck. At the end of the lease term, Situ sold the truck to a third party for $3,200, which was the trucks fair value at December 31, 2025. Hunter paid Situ the difference between the residual value guarantee of $3,500 and the proceeds obtained on the resale. Hunter knows the interest rate that is implicit in the lease. Hunter knows the amount of executory costs included in the minimum lease payments. Hunter uses straight-line depreciation for its trucks with the residual value guarantee of $3,500 for the leased truck.

1. Prepare the journal entries that Situ would make on January 1, 2023, and the adjusting journal entries at December 31, 2023, to record the annual interest income from the lease arrangement, assuming that Situ has a December 31 fiscal year end.
2. Identify all accounts that will be reported by Situ on its comparative statement of income for the fiscal years ending December 31, 2024 and 2023, and its comparative statement of financial position at December 31, 2024 and 2023. Be specific about the classifications in each statement.