Headland Corporation borrowed $54,100 on November 1, 2020, by signing a $55,240, 3-month, zero-interest-bearing note. Prepare Headland'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.)

See the explanation below

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