• Record the receipt of 3,500,000 million yuan note.

• 2

  Record the accrued interest for the period 09/30/2020 12/31/2020.

• 3

  Record to revalue the note payable at the spot rate, and record the foreign exchange gain/loss thereof.

• 4

  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.

• 5

  Record the accrued interest for the period 09/30/2021 12/31/2021.

• 6

  Record to revalue the note payable at the spot rate, and record the foreign exchange gain/loss thereof.

• 7

  Record the second annual interest payment, record interest expense for the period 01/01/2022 09/30/2022, and record a foreign exchange gain or loss on the interest payable accrued at 12/31/2021.

• 8

  Record the payment of 1 million yuan note.

On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 3,500,000 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 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: U.S. Dollar per Chinese Yuan Date September 30, 2020 December 31, 2020 September 30, 2021 December 31, 2021 September 30, 2022 (CNY) $ 0.240 0.245 0.260 0.265 0.290 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. No Date General Journal Debit Credit 1 09/30/2020 840,000 Cash Note payable (CNY) > 840,000 2 12/31/2020 8,575 Interest expense Interest payable (CNY) O 8,575 3 12/31/2020 17,500 Foreign exchange loss Note payable (CNY) 17,500 4 09/30/2021 36,400 x Interest expense Interest payable (CNY) Cash x 5 12/31/2021 9,275 Interest expense Interest payable (CNY) >> 9,275 6 12/31/2021 17,500 Foreign exchange loss Note payable (CNY) pl 66,500 7 09/30/2022 87,500 Foreign exchange loss Note payable (CNY) 8 09/30/2022 Note payable (CNY) Cash 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. (Do not round intermediate calculations.) Effective Cost of Borrowing 2020 2021 2022