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Prepare appropriate journal entries for Universal Leasing

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Reference no: EM132527448

Question - 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 $30,900 (this is both cost and fair value) to a local publisher, Desktop Inc. on December 31, 2017. The lease contract specified three annual payments beginning January 1, 2018, the beginning of the lease, and each December 31 through 2019 (three-year lease term). The publisher had the option to purchase the machine on December 30, 2020, the end of the lease term, for $12,000 when it was expected to have a residual value of $16,000, a sufficient difference that exercise seems reasonably certain.

Required -

1. Determine the amount of the annual lease payment (round to the nearest dollar).

2. Need an amortization table for Universal Leasing for the lease term.

3. Prepare the appropriate journal entries for Universal Leasing from the beginning of the lease through the end of the lease term.

4. Determine the amount that Desktop will record as amortization expense for December 31, 2018.

Reference no: EM132527448

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