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 intercompany 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 December 31, 2020.

Description		Debit	Credit
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
To eliminate the intercompany profit from Krocker's beg. Inventory.
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
To eliminate intercompany sales and purchases.
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
AnswerCost of goods soldInventoriesInvestment in KrockerRetained earnings, beg. - KrockerSales revenue		Answer	Answer
To eliminate the intercompany profit from Krockers ending inventory.

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?

$Answer

What amount should appear in consolidated cost of goods sold for these shoe accessories?

$Answer

Show how the eliminating entries in part a adjust Krockers cost of goods sold balance to the correct consolidated balance.

Account		Krocker Dr (Cr)	Jimmitz Dr (Cr)	Debit	Credit	Consolidated Balances Dr (Cr)
Cost of goods sold		$Answer	$Answer	Answer	Answer	$Answer
					Answer