Question:

Can you determine whether each contract conveys the right to control the use of the identified asset to Logical Logistics?

Requirement:

Use Accounting Standards Codification to interpret the codification paragraph into 'plain English' as best you can.In other words, how would you explain the appropriate accounting treatment to a colleague, boss, or business partner who has a basic understanding of accounting?

Information:

Logical Logistics Inc. (Logical Logistics or the "Company") provides transportation and logistics services to customers through a network of offices in North America, South America, and Asia. The Company contracts fleets of shipping vessels, trucks, and aircraft to provide regional, long-haul, and international shipments of customer goods. In addition, the Company contracts warehouse operators across North America for use of their facilities as distribution centers that temporarily store goods in transit. The Company has entered into the following contracts with the vendors identified below.

Logical Logistics enters into a contract with Fly-By-Air Inc. (Fly-By-Air) to use its aircraft to transport customer goods from South America to North America. Fly-By-Air has a fleet of 50 multi-use aircraft, each of which has the capacity to hold 500 shipping pallets of customer goods.

Fly-By-Air

oThe contract term is five years.

oFBA1231, a commercial aircraft in Fly-By-Air's fleet, is dedicated to delivering Logical Logistics's shipping pallets during the term of the contract.

oLogical Logistics determines (1) the airports from and to which goods are shipped and received and (2) the order in which deliveries are made to the airports. Fly-By-Air provides the aircraft's pilot and crew, and Logical Logistics instructs Fly-By-Air accordingly

oWhile Logical Logistics determines what cargo will be transported throughout the term of the contract, certain restrictions prevent the Company from shipping flammable materials.

oLogical Logistics has the right to send the aircraft regardless of whether its cargo levels meet the full storage capacity of the aircraft. If FBA1231is below capacity, Fly-By-Air cannot use the excess storage space to ship products of its other customers.