On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 3,400,000 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 will repay the principal on September 30, 2022. PFI prepares U.S. dollar financial statements and has a December 31 year-end. Relevant exchange rates are as follows:

Date	U.S. Dollar per Chinese Yuan (CNY)
September 30, 2020	$	0.230
December 31, 2020		0.235
September 30, 2021		0.250
December 31, 2021		0.255
September 30, 2022		0.280

1. Prepare all journal entries related to this foreign currency borrowing.
2. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in U.S. dollars on the loan in each of the three years 2020, 2021, and 2022.

Prepare all journal entries related to this foreign currency borrowing. (Do not round intermediate calculations. If no is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 1 09/30/2020 782,000 Cash Note payable (CNY) 782,000 2 12/31/2020 7,990 Interest expense Interest payable (CNY) 7,990 3 12/31/2020 17,000 Foreign exchange loss Note payable (CNY) 17,000 4 09/30/2021 Interest expense Interest payable (CNY) Foreign exchange loss Cash OO OOOO 5 12/31/2021 Interest expense Interest payable (CNY) olo 6 12/31/2021 Foreign exchange loss Note payable (CNY) 7 09/30/2022 Interest expense Interest payable (CNY) Foreign exchange loss Cash OO OOOO 8 09/30/2022 Note payable (CNY) Foreign exchange loss Cash