Activ Corp sells package, which gives customers a mobile phone when they sign a two- year contract for provision of mobile services for $75 per month. The cost of mobile phones given for free are accounted as marketing expenses by the company as these costs are incurred to obtain a client. And $75 per month are recorded as revenue from mobile service.

Mobile phone has a stand-alone market price of $840 and mobile service contract is normally sold for $50 per month.

Required:

1. Please discuss whether current treatment of mobile service + mobile phone package is performed in accordance with IFRS 15 Revenue from Contracts with Customers. What are the five steps for revenue recognition to be used in acordancw with IFRS 15? (1.5 points)
2. What is the amount of revenue to be recognized by Activ Corp for each performance obligation during Year 1 and 2 of service? (2 points)

Also Activ Corp receives government assistance to provide internet to remote, rural areas. The company purchased a new equipment at a cost of $1 000 000 on 1 September 2019. The equipment has an estimated useful life of 10 years and zero residual value. Activ Corp uses straight-line depreciation.

The equipment was financed by the government grant of 30% of its purchase price. According to the terms of the grant, the company retains the equipment at least 3 years, and then no repayment liability will be incurred. Activ Corp has no intention of selling of the equipment within the first three years.

Activs accounting policy for government grants is to treat them as reduction in the carrying amount of related assets.

Required:

3. Show journal entries at the moment the grant was received and as at December 31, 2019. What is the carrying value of equipment as at 2019 year end? (2.5 points)