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Sierra Fishing Co. enters into a 15-year lease of a fishing boat. Lease payments are $30,000 per year payable at the end of each year.
Sierra Fishing Co. enters into a 15-year lease of a fishing boat. Lease payments are $30,000 per year payable at the
end of each year. The interest rate implicit in the lease is not readily determinable. Sierra Fishing Co's. incremental
borrowing rate is 8 percent per annum. Sierra Fishing Co. depreciates the fishing boat on a straight line basis over the
12 lease term. At lease commencement, the right-of-use asset is $286,784 and the lease liability is $256,784.
How should Sierra Fishing Co. account for the lease at the end of Year 1?
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