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 inter company merchandise transactions is below

Inventory balance on Krocker’s books, purchased from Jimmitz, January 1, 2020 . . . . . . . . . . $ 11,250

Inventory balance on Krocker’s 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 Jimmitz’s 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 Krocker’s cost of goods sold balance to the correct consolidated balance.