Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories to Krocker at a 20% markup on cost. Information on these intercompany merchandise transactions is below (in thousands):

Required

a. Prepare the working paper eliminating entries related to these intercompany transactions at December 31, 2017.

b. Krocker sold shoes containing Jimmitz’s shoe accessories during 2017. What amount did Krocker and Jimmitz record as cost of goods sold for the shoe accessories in 2017? What amount should appear in consolidated cost of goods sold for these shoe accessories? Show how the eliminating entries in part a adjust Krocker’s cost of goods sold balance to the correct consolidated balance.

Transcribed Image Text:

Inventory balance on Krocker's books, purchased from Jimmitz, January 1, 2017 Inventory balance on Krocker's books, purchased from Jimmitz, December 31, 2017. Total sales revenue recorded by Jimmitz on merchandise sales to Krocker in 2017 $ 10,800 10,200 900,000