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Madrigal Coffee Company (MCC) purchases and roasts raw coffee beans from around the world and sells roasted whole and ground coffee to retailers and restaurants. The company began business on November 1, 2019 Beginning Account Balances as of January 1, 2020 are as follows: Cash Inventory Accounts Payable Common Stock Retained Earnings $32,000 $52,000 $10,500 $71,500 $2,000 The following transactions took place during the year ended December 31, 2020: (1) January 2 Madrigal sold 125,000 shares of its common stock to shareholders for $225,000 cash to help in launching MCC. MCC has no par value for its stock. (2) January 2 Madrigal signed a lease starting on March 1 to rent a warehouse for roasting and storing its coffee beans. The lease calls for monthly rent of 58,250, payable on the first of each month starting March 1. (3) January 31 Madrigal hired a VP of operations. Her salary is $4,500 per month. She will start work on February 1 and is paid on the first day of each month for the work performed in the previous month. Her first paycheck will be on March 1 for work performed in February (4) January 31 MCC obtained a $250,000 cash loan from National Bank. The note has a 4.75% annual interest rate and requires monthly interest only payments (0.40% per month) on the first day of every month beginning on March 1, 2020. The loan is due to be paid in full in two years. (5) February 28 MCC purchased roasting equipment, shelving. racks, and a forklift for the warehouse on account for $202,500. This equipment is expected to be usable for 10 years (6) March 1 Made its first monthly interest payment to National Bank for the $250,000 loan it obtained in transaction (4). Also made first wage payment to the VP of operations from transaction (3). - Don't forget the rest of the months!
(6) March 1 Made its first monthly interest payment to National Bank for the $250,000 loan it obtained in transaction (4). Also made first wage payment to the VP of operations from transaction (3). - Don't forget the rest of the months! (7) March 28 MCC purchased a general insurance plan that will cover the company for one year from April 1. 2020 through March 30, 2021. The policy cost $32,500 for the year. MCC paid for the policy in cash. (8) June 1 MCC pays for the equipment purchased in transaction (5) and the S10,500 of accounts payable that it owed from the prior year. (9) June 15 Sold 35,000 pounds of roasted coffee to McDugals on account for use in their restaurants for $3.10 per pound. The coffee cost MCC S1.35 per pound to purchase and roast (10) July 7 Purchased 200,000 pounds of coffee from a supplier for $1.15 per pound on account. (11) August 8 Signed a contract with Cost Club, a retail chain, to provide them with 20,000 pounds of ground roasted coffee per month at a price of $2.85 per pound for one year, starting on September 1. Cost Club pays for 6 months of the contract up front. The cost of the coffee to MCC is $1.45 per pound. (12) September ! Pays an advertising firm S12,000 to help identify and market to new customers. The contract with the firm is for one year. (13) October 3 Made a partial payment of $175,000 on the inventory purchased in transaction (10). (14) October 15 Sold and delivered 3,000 pounds of ground roasted coffee to Joey's Cafe at a price of $2.95 per pound. Joey's pays upon delivery. The cost of the coffee to MCC is $1.45 per pound (15) November 7 Sold and shipped 25,000 pounds of roasted whole coffee to Super Chain, a retailer, for $2.88 per pound on account. The cost of the coffee to MCC was $1.30 per pound (16) December 10 Receive a utility bill for $520 which is due and will be paid on January 9, 2021.
purchase and roast. (10) July 7 Purchased 200,000 pounds of coffee from a supplier for S1.15 per pound on account (11) August 8 Signed a contract with Cost Club, a retail chain, to provide them with 20,000 pounds of ground roasted coffee per month at a price of $2.85 per pound for one year, starting on September 1. Cost Club pays for 6 months of the contract up front. The cost of the coffee to MCC is $1.45 per pound. (12) September Pays an advertising firm $12,000 to help identify and market to new customers. The contract with the firm is for one year. (13) October 3 Made a partial payment of $175,000 on the inventory purchased in transaction (10). (14) October 15 Sold and delivered 3,000 pounds of ground roasted coffee to Joey's Cafe at a price of $2.95 per pound. Joey's pays upon delivery. The cost of the coffee to MCC is $1.45 per pound. (15) November 7 Sold and shipped 25,000 pounds of roasted whole coffee to Super Chain, a retailer, for $2.88 per pound on account. The cost of the coffee to MCC was $1.30 per pound (16) December 10 Receive a utility bill for $520 which is due and will be paid on January 9, 2021. (17) December 15 Paid a $2,500 dividend to shareholders. (18) December 31 Ordered 100,000 pounds of raw coffee from a supplier for $1.10 per pound. The coffee will be shipped by the supplier on January 3. While closing the books for 2020, MCC determines that after significant collection efforts, they are unsure that they will collect the full amount due from McDugals (transaction 9), as no payments have been made since the sale in June. Based on conversations with McDugals, MCC estimates that 10% of the balance due from McDugals is potentially uncollectible.