QUESTION 4

A telecommunications operator sells standard mobile phones for $360 each. It also provides network services for $35 a month, with no mobile phone included. If a customer purchases a mobile phone and a 24 month service plan, then the customer only pays $25 a month and receives the mobile phone forfree. A customer, Zhang, enters into a contract with the telecommunications operator on 1 January 2016 where he receives the mobile phone for free and enters into a 24 month plan for $25 a month.

Part A Prepare the journal entries to record the above contract in the books of the telecommunications operator on 1 January 2016 and at the end of the first month of the contract, 31 January 2016. Part B

AASB15 Revenue from customers requires that a promised good or service must be distinct or consist of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. A promised good or service is distinct if the customer can benefit from the goods or services on its own or in conjunction with readily available resources and the entitys promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract.

Discuss the factors that indicate an entitys promise to transfer a goods or services is separately identifiable.