Odom Ltd purchased a 30% shareholding in Bryant Ltd on 1 Jan 20X7 for $60 000. This purchase resulted in Odom Ltd having significant influence over Bryant Ltd. Bryant's assets were recorded at fair values and its owners' equity, totalling $180 000, was: Share capital $80 000 Reserves $60 000 Retained profits $40 000 During 20X7 Bryant Ltd reported profit of $100 000, from which a dividend of $60 000 was paid. Also, during the year, Bryant revalued its assets upwards by $50 000, and sold inventories to Willams Ltd which is the subsidiary of Odom. Bryant made a profit of $4,000. Half of the inventories were still held by Willams by the year-end. Odom Ltd has an 80% equity interest in Willams Ltd.
Odom Ltd purchased a 30% shareholding in Bryant Ltd on 1 Jan 20X7 for $60 000. This purchase resulted in Odom Ltd having significant influence over Bryant Ltd. Bryant's assets were recorded at fair values and its owners' equity, totalling $180 000, was: Share capital $80 000 Reserves $60 000 Retained profits $40 000 During 20X7 Bryant Ltd reported profit of $100 000, from which a dividend of $60 000 was paid. Also, during the year, Bryant revalued its assets upwards by $50 000, and sold inventories to Willams Ltd which is the subsidiary of Odom. Bryant made a profit of $4,000. Half of the inventories were still held by Willams by the year-end. Odom Ltd has an 80% equity interest in Willams Ltd.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Odom Ltd purchased a 30% shareholding in Bryant Ltd on 1 Jan 20X7 for $60 000. This purchase resulted in Odom
Ltd having significant influence over Bryant Ltd. Bryant's assets were recorded at fair values and its owners' equity,
totalling $180 000, was:
Share capital
$80 000
Reserves
$60 000
Retained profits $40 000
During 20X7 Bryant Ltd reported profit of $100 000, from which a dividend of $60 000 was paid. Also, during the
year, Bryant revalued its assets upwards by $50 000, and sold inventories to Willams Ltd which is the subsidiary of
Odom. Bryant made a profit of $4,000. Half of the inventories were still held by Willams by the year-end. Odom Ltd
has an 80% equity interest in Willams Ltd.
Required:
Prepare journal entries for Odom Ltd to account for its investment in Bryant Ltd using the Equity Method. Use the
Reclassification Method to account for the profit and dividends that Odom shares from Bryant. (Using the provided
journal entry template to enter your answer; workings/calculations or narrations are NOT required.)
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