To analyze the acceptance of the note, let’s break it down into the key financial components:

1. Principal Amount (Face Value of the Note): $7,440
   This represents the amount extended to Mulan Company.

2. Duration of the Note: 90 days
   The note will mature in 90 days, at which time the principal and accrued interest will be due.

3. Interest Rate: 10% annual rate
   This rate will be used to calculate the interest on the note.

Calculating the Interest

The formula to calculate interest is:

$\text{Interest} = \text{Principal} \times \text{Rate} \times \frac{\text{Time (days)}}{360}$

Assuming a 360-day year for simplicity:

$\text{Interest} = 7,440 \times 0.10 \times \frac{90}{360}$

$\text{Interest} = 7,440 \times 0.10 \times 0.25 = 186$

Total Amount Due at Maturity

The total amount to be paid at maturity includes the principal and the accrued interest:

$\text{Total Amount} = \text{Principal} + \text{Interest}$

$\text{Total Amount} = 7,440 + 186 = 7,626$

Journal Entry for Accepting the Note

On the date of acceptance of the note, the company records the following journal entry:

• Debit: Notes Receivable $7,440
  (Recognizes the note receivable as an asset.)

• Credit: Accounts Receivable – Mulan Company $7,440
  (Removes the past-due account receivable.)

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Summary

• Principal Amount: $7,440
• Interest Accrued (90 days): $186
• Total Amount at Maturity: $7,626

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Would you like me to:

• Detail the journal entry for maturity?
• Explain the impact on financial statements?
• Discuss implications of the 90-day term?
• Show different methods of interest computation?
• Review the overall notes receivable management?

Tip: Regularly monitoring receivables and credit terms can improve cash flow and reduce bad debt risks.