Q. 03
On September 30, 2020, Peace Frog International (PF1) (a U.S.-based company) negotiated a two-year, 2,600,000 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 September 30, 2020 December 31, 2020 September 30, 2021 December 31, 2021 September 30, 2022 U.S. Dollar per Chinese Yuan (CNY) $0.150 0.155 0.70 0.175 0.200 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 effective interest rate in U.S. dollars on the loan in each of the three years 2020, 2021, and 2022. Complete this question by entering your answers in the tabs below. Required A Required B Prepare all journal entries related to this foreign currency borrowing. (Do not round Intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Complete this question by entering your answers in the tabs below. Required A Required B Prepare all journal entries related to this foreign currency borrowing. (Do not round Intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 Record the receipt of 2,600,000 million yuan note. Note: Enter debits before credits Date General Journal Dobit Credit 09/30/2020 Record entry Clear entry View general journal View transaction list Journal entry worksheet Record the accrued interest for the period 09/30/2020 - 12/31/2020. Note: Enter debits before credits. Date General Journal Debit Credit 12/31/2020 Record entry Clear entry View general Journal Required A Required B > Required A Required B Prepare all journal entries related to this foreign currency borrowing. (Do not round intermediate calculations. If no entry is require a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 6 Record to revalue the note payable at the spot rate, and record the foreign exchange gain/loss thereof. Note: Enter debits before credits Debit General Journal Date Credit 12/31/2020 Record entry Clear entry View general Journal wed Required A Required B Prepare all journal entries related to this foreign currency borrowing. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 Record the first annual interest payment, record interest expense for the period 01/01/2021 - 09/30/2021, and record a foreign exchange gain or loss on the interest payable accrued at 12/31/2020. Note: Enter debits before credits General Journal Debit Credit Date 09/30/2021 Record entry Clear entry View general Journal HOGA Required B > Required A Required B Prepare all journal entries related to this foreign currency borrowing. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction ist Journal entry worksheet
