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On September $30,2023,$ Peace Frog International $($PFI$)($a U$.$S$.-$based company$)$ negotiated a two$-$year, $2,500,000$ Chinese yuan loan from a Chinese bank at an interest rate of $4$ percent per year. The company makes interest payments annually on September $30$ and

$4$

will repay the principal on September $30,2025.$ PFI prepares U$.$S$.$ dollar financial statements and has a December $31$ year$-$end.

points

Relevant exchange rates are as follows:

$\backslash$table$[[$eBook$],[$Print$],[$References$]]$

U$.$S$.$ Dollar

per Chinese

Yuan $($CNY$)$

Required:

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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