Accounting

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1- Organization are required to recognize lease assets by lessee on the balance sheet, in order for recognizing rights and obligations by lease on asset and liability. With both finance lease and operating lease, debit to right-of-use asset and credit to lease liability must be recognized in the beginning.

· Contract for Affordable yacht:

· MV Ling Beach is identified Asset

· Evergreen use MV Ling Beach for particularly shipping yacht

· This shipment will be only used to Affordable yacht due to terms of the contract

· Contract for Luxury yacht:

· No identifiable Asset

· No specific timing

· Due to the terms provided, Evergreen is free to ship yacht within the range of deadline

2- Evergreen works under the control of Yacht Inc. under Affordable contract. All of the shipment is surprised and controlled by Yacht Inc. and Evergreen with accordance to Affordable model shipment which is guided by Yacht Inc. All decisions are made by Yacht Inc. for delivering the shipment. Also, Yacht Inc. determines which port in East Asia can receive the shipment. As observed above, right to the control of identified asset goes to Yacht Inc.

In addition, the suitable accounting recognized by lessee of the lease must be classified as short-term lease.