Herb Corporation holds 60 percent ownership of Spice Company. Each year, Spice Company purchases large quantities of a gnarl root used in producing health drinks. Spice purchased \(\$ 150,000\) of roots in \(20 \times 7\) and sold \(\$ 40,000\) of these purchases to Herb Corporation for \(\$ 60,000\). By the end of \(20 \times 7\). Herb Corporation had resold all but \(\$ 15,000\) of its purchase from Spice. Herb Corporation generated \(\$ 90,000\) on the sale of roots to various health stores during the year. Both Herb Corporation and Spice Company use periodic inventory systems in accounting for inventory.

\section*{Required}

a. Give the joumal entries recorded by Herb Corporation and Spice Company during \(20 \mathrm{X} 7\) relating to the initial purchase, intercorporate sale, and resale of gnarl roots.

b. Give the workpaper eliminating entries needed as of December \(31,20 \times 7\), to remove all effects of the intercompany transfer in preparing the \(20 \times 7\) consolidated financial statements.