Working notes
Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. Universal earns interest under these arrangements at a 10% annual rate. The company leased an electronic typesetting machine it purchased for $31,900 to a local publisher, Desktop Inc., on December 31, 2020. The lease contract specified annual payments of $7,953 beginning January 1, 2021, the beginning of the lease, and each December 31 through 2022 (three- year lease term). The publisher had the option to purchase the machine on December 30, 2023, the end of the lease term, for $13,500 when it was expected to have a residual value of $17,500, a sufficient difference that exercise seems reasonably certain. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Show how Universal calculated the $7,953 annual lease payments for this sales-type lease. 2. Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over the lease term. 3. Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of the lease term. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over 1 (Round your intermediate and final answers to the nearest whole dollar amount. Enter all amounts as posit Lease Amortization Schedule Effective Decrease in Interest Balance Date Payments Outstanding Balance 31,900 0 31,900 31,900 01/01/2021 12/31/2021 12/31/2022 12/31/2023 Total 7,953 7,953 7,953 Docuired 1 Dourad 2 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Show how Universal calculated the $7,953 annual lease payments for this sales-ty final answers to the nearest whole dollar amount. Enter decreases with a minus si Amount to be recovered CA Amount to be recovered through periodic lease payments Lease payments at the beginning each of three years 0 7,953 View transaction list View journal entry worksheet No General Journal Debit Cri 1 Date January 01, 2021 Equipment Lease payable 2 January 01, 2021 Lease payable Cash 3 December 31, 2021 Depreciation expense Accumulated depreciation 4 December 31, 2022 Lease payable Interest expense Cash 5 December 30, 2023 Lease payable Interest expense Cash
