Problem $15-10($Algo$)$ Change in lease term; operating lease; lessor $[$LO$15-4,15-6]$

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 leases.

Universal earns interest under these arrangements at a $10\%$ annual rate.

Universal purchased an electronic typesetting machine on December $31,2023,$ for $$96,000$ and then leased it to Desktop, Incorporated, a local publisher.

The six$-$year operating lease term commenced January $1,2024,$ and the lease contract specified annual payments of $$8,600$ beginning December $31,2024,$ and on each December $31$ through $2029.$

The machine$$s estimated useful life is $15$ years with no estimated residual value.

The publisher had the option to terminate the lease after four years. At the beginning of the lease, there was no reason to believe the lease would be terminated.

Required:

Prepare the appropriate entries for Universal Leasing from the beginning of the lease through the end of $2024.$

At the beginning of $2025,$ there was a significant indication that Desktop$$s economic incentive to terminate the lease had changed causing both companies to believe termination of the lease at the end of four years $($three years remaining$)$ is "reasonably certain." Prepare any appropriate entry for Universal Leasing on January $1,2025,$ to reflect the change in the lease term.

Prepare the appropriate entry pertaining to the lease for Universal Leasing on December $31,2025.$