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Universal Leasing leases electronic equipment to a variety of businesses. The companys 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 11% annual rate. The company leased an electronic typesetting machine it purchased for $40,900 to a local publisher, Desktop Inc. on December 31, 2017. The lease contract specified annual payments of $8,959 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 $22,700 when it was expected to have a residual value of $26,700, 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 $8,959 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.

Show how Universal calculated the $8,959 annual lease payments for this sales-type lease. (Round your intermediate and final answers to the nearest whole dollar amount.)

	Amount to be recovered Less: Present value of the exercise price Amount to be recovered through periodic lease payments $0 Lease payments at the beginning each of three years $8,959

Prepare an amortization schedule that describes the pattern of interest revenue for Universal Leasing over the lease term. (Round your intermediate and final answers to the nearest whole dollar amount. Enter all amounts as positive values.)

	Lease Amortization Schedule Date Payments Effective Interest Decrease in Balance Outstanding Balance 01/01/2018 12/31/2018 12/31/2019 12/31/2020 Total

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