On July 1, 2020, XXT Satellite Services Ltd. purchased an automobile for $40,000. The company paid $10,000 cash and issued a $30,000 note due on April 1, 2021, for the balance. The 4% annual interest rate on the note, which approximates the market rate of interest for similar transactions, is payable at maturity. XXT’s year-end is December 31. XXT computes interest accruals based on the number of days, rather than months. 

Required: 

a. Prepare the journal entry to record the purchase of the automobile. 

b. Prepare the journal entry to record the accrual of interest at December 31, 2020, assuming that XXT prepares adjusting entries only at year-end. 

c. Prepare the journal entry to record the retirement of the note payable on April 1, 2021.