Tolmeka Leasing Purchased Equipment for $3,000,000 and Leased It to Munchow

question 56

Essay

Tolmeka Leasing purchased equipment for $3,000,000 and leased it to Munchow Industries on January 1, 2013. Both companies record appropriate adjusting entries quarterly. Required:
1. Following the guidance of the new ASU, prepare the journal entries to record the lease by Munchow (lessee) at its commencement of the lease through the second lease payment on April 1, 2013. Round to nearest dollar. Show calculations.
2. Following the guidance of the new ASU, prepare the journal entries to record the lease by Tolmeka (lessor) at its commencement of the lease through the second lease payment on April 1, 2013. Round to nearest dollar. Show calculations.
3. Following current U.S. GAAP, prepare the journal entries to record the lease by Munchow (lessee) at its commencement of the lease through the second lease payment on April 1, 2013. Round to nearest dollar. Show calculations.
4. Suppose the cost and fair value of the asset is $2,000,000 and its economic life is 5 years. Following current U.S. GAAP, prepare the journal entries to record the lease by Munchow (lessee) at its commencement of the lease through the second lease payment on April 1, 2013. Round to nearest dollar. Show calculations.

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Definitions:

Rivalry

The competitive relationship between firms in the market, striving to gain advantage over each other in terms of sales, market share, or innovation.

Nonexcludable

A characteristic of a good or service whereby it is not possible to prevent people who have not paid for it from having access to it.

Free-rider Problem

A situation in which individuals benefit from resources, goods, or services without paying for them, leading to underprovision of those goods or services.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning that anyone can consume them without diminishing their availability to others, such as public parks and clean air.