Question
Upstream Intercompany Merchandise Transactions Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories to Krocker at a 25% markup on cost. Information
Upstream Intercompany Merchandise Transactions Jimmitz Inc. is a subsidiary of Krocker
Gear. Jimmitz sells shoe accessories to Krocker at a 25% markup on cost. Information on these intercom
pany merchandise transactions is below
Inventory balance on Krockers books, purchased from Jimmitz, January 1, 2020 . . . . . . . . . . $ 11,250
Inventory balance on Krockers books, purchased from Jimmitz, December 31, 2020 . . . . . . . 10,250
Total sales revenue recorded by Jimmitz on merchandise sales to Krocker in 2020 . . . . . . . . . 1,500,000
Required
a. Prepare the working paper eliminating entries related to these intercompany transactions at Decem
ber 31, 2020.
b. Krocker sold shoes containing Jimmitzs shoe accessories during 2020. What amount did Krocker
and Jimmitz record as cost of goods sold for the shoe accessories in 2020? What amount should ap
pear in consolidated cost of goods sold for these shoe accessories? Show how the eliminating entries
in part a adjust Krockers cost of goods sold balance to the correct consolidated balance
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