Answer:
See the explanation below
Step-by-step explanation:
a. Headland’s November 1, 2020, entry
Details Dr ($) Cr ($)
Cash 54,100
Discount on Note payable 1,140
Notes payable 55,240
Being cash received and discount received from zero interest bearing note
b. The December 31, 2020, annual adjusting entry
Total discount on notes payable = $55,240 - $54,100 = 1,140
Monthly discount on notes payable = 1,140 ÷ 3 = $380
November and December discount on notes payable = $380 × 2 = $760
Details Dr ($) Cr ($)
Interest expenses 760
Discount on Note payable 760
Being the annual adjusting entry for Notes payable
c. the February 1, 2021, entry.
Details Dr ($) Cr ($)
Interest expenses 380
Note payable 55,240
Cash 55,240
Discount on Note payable 380
Being payment for notes payable