Question

Warren Marina owns a large marina that contains numerous boat slips of various sizes. Warren contracts with boat owners to provide slips to house the customers’ boats. Lucky Fisherman Fleet contracted with Warren to provide space for four of its fishing boats. The contract specifies that Lucky Fisherman’s boats will be kept in identified slips in the marina. However, Warren has the right to shift the boats to other slips within its marina at its discretion, subject to the requirement to provide 45-foot slips per boat for a three-year period. Warren frequently rearranges its customers’ boats to meet the needs of new contracts. Costs of reallocating space is low relative to the benefits of being able to accommodate more customers and their specific requests. Warren paid $16,000 on March 1, 2021, for the first year´s accommodations. The market rate of interest is 5%.

¿Why is it a lease? (explain it with the two key criteria: there must be an identified asset and the lessee must have the right to control the use of the identified asset)

Answer 1

owns Pinol According to data The given information about the warren Marina a large masina that Contains numerous boat slips of various sozes. Does the contract explently at implicitly identify asset to be used to fulfill the Contract? No. Two key Criteria must be met for an arrangement to Constitute a lease :- :- 1. There must be an identified asset, and 2. The lessee must have the right to Contool the use of the identified asset. * The asset is identified because the Contractexplicity Specifies 45- foot slips for four boats which will be identified per boat, although the actual location of the slips is not identified.

P.. * Although Warren marina has agreed to Provide a Specific level of Capacity within it's marina, it has the unilateral right to selocate lucky fisherman fleet's boats for its own benefit and Can do so without significant Cost to accommodate mole Customers and thus provide economic benefits to Harren Marina. * This is a Substantive Substitution right. Therefore, this agreement Constitutes a Service Contract, not a lease. March 1, 2021 Prepaid expense 16,000 Cash. 16,000 please vote positively....