On September 30, 2023, Peace Frog International (PFI) (a U.S.-based company) negotiated a two year, 1,000,000 Chinese

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On September 30, 2023, Peace Frog International (PFI) (a U.S.-based company) negotiated a two year, 1,000,000 Chinese yuan loan from a Chinese bank at an interest rate of 2 percent per year. The company makes interest payments annually on September 30 and will repay the principal on September 30, 2025. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows:


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a. Prepare all journal entries related to this foreign currency borrowing.b. Taking the exchange rate effect on the cost of borrowing into consideration, determine the U.S. dollar “effective borrowing rate” on the loan in each of the three years 2023, 2024, and 2025.

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Fundamentals Of Advanced Accounting

ISBN: 9781266268533

9th International Edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

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