Stellar company borrowed $37,200 on november 1, 2020, by signing a $37,200, 9%, 3-month note. prepare stellar’s november 1, 2020, entry; the december 31, 2020, annual adjusting entry; and the february 1, 2021, entry. (if no entry is required, select "no entry" for the account titles and enter 0 for the amounts. credit account titles are automatically indented when amount is entered. do not indent manually. record journal entries in the order presented in the problem.)

Explanation:

The journal entries are shown below:

(A) Cash A/c Dr $37,200

           To Notes payable A/c $37,200

(Being note is issued for cash)

(B) Interest expense A/c Dr $558

         To Interest payable A/c  $558

(Being accrued interest adjusted)

The interest expense would be

= Principal × rate of interest × number of months ÷ (total number of months in a year)  

= $37,200 × 9% × (2 months÷ 12 months)

= $558

The two months is calculated from November 1 to December 31

(C) Interest expense A/c Dr $279

    Interest payable A/c Dr $558

   Notes payable A/c Dr $37,200

                                      To Cash A/c $38,037

(Being cash is paid on maturity)

The computation is shown below

= Principal × rate of interest × number of months ÷ (total number of months in a year)  

= $37,200 × 9% × (1 months÷ 12 months)

= $279

The two months is calculated from the  December 31 to February 1

u = 30

continuing your method

= +

subtract from both sides

= - thus

= -

= ⇒ u = 30