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.)

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