Bevley Ltd acquired a 35% interest in Mevley Ltd for $190,000 cash on 1 July 2018. The directors of Bevley Ltd believe this investment represents significant influence over the investee. The equity of Mevley Ltd at the acquisition date was:

Share capital $160,000

Retained earnings $240,000

$400,000

All the identifiable assets and liabilities of Mevley Ltd were recorded at fair value.

For the period ended 30 June 2019, Mevley Ltd recorded profit before tax of $260,000 with a tax expense of $75,000. Mevley Ltd paid its shareholders a total of $ 120,000 in dividend. Furthermore, profit before tax of $ 110,000 was made for the 2020 reporting period. The tax expense for the year ended 30 June 2020 is $64,000. Mevley Ltd paid dividends of $70,000 in 2020.

Required:

Prepare journal entries in the records of Bevley Ltd for each of the years ended 30 June 2019 to 2020 in relation to its investment in the associate, Mevley Ltd.

(Note: Assume Bevley Ltd prepares consolidated financial statements.)

Part B (4 Marks)

The Managing Director of Corona Ltd in Box hill manufactures face masks. This is a small company manufactures face masks for residents in Australia only and provides you the Financial Statements for the financial year ended 30 June 2020. It has come to your attention the following assets have been recognized as intangibles in the draft financial statements:

1. Training costs associated with new LED face masks

2. Cost of new research on ultraviolet face masks

Required

Determine which of these items should be included as an intangible asset in the Statement of Financial Position of Corona Ltd. Give reasons for your answers.