Franconia Leasing Leases Equipment to a Variety of Businesses

Franconia Leasing leases 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. Franconia earns interest under these arrangements at a 10% annual rate.
The company leased an electronic typesetting machine it purchased for $123,600 to a local publisher, MacCleod Inc. on December 31, 2017. The lease contract specified annual payments of $32,000 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 $48,000 when it was expected to have a residual value of $64,000, a sufficient difference that exercise seems reasonably certain.
Required:
Round your answers to the nearest whole dollar amounts.
1. Show how Franconia calculated the $32,000 annual lease payments for this sales-type lease.
2. Prepare the appropriate journal entries for Franconia Leasing from the beginning of the lease through the end of the lease term.