On September 30, 2020, 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, 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 (CNY) Date September 30, 2020 December 31, 2020 September 30, 2021 December 31, 2021 September 30, 2022 $0.100 0.105 0.120 0.125 0.150 a. Prepare all journal entries related to this foreign currency borrowing.
On September 30, 2020, 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, 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 (CNY) Date September 30, 2020 December 31, 2020 September 30, 2021 December 31, 2021 September 30, 2022 $0.100 0.105 0.120 0.125 0.150 a. Prepare all journal entries related to this foreign currency borrowing.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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what am I missing for required A?
Transcribed Image Text:On September 30, 2020, Peace Frog International (PF) (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, 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 (CNY)
$0.100
Date
September 30, 2020
December 31, 2020
September 30, 2021
December 31, 2021
September 30, 2022
0.105
0.120
0.125
0.150
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. dotlars on
the loan in each of the three years 2020, 2021, and 2022.
Transcribed Image Text:aJournal
Hrean
09/30/2020
Cash
100,000 ०
Note payable (CNY)
100,000 O
12/31/2020
Interest expense
525 O
Interest payable (CNY)
525 O
Foreign exchange gain or loss
Note payable (CNY)
12/31/2020
5,000 O
5,000
09/30/2021
Interest expense
4.475
Interest payable (CNY)
Foreign exchange gain or loss
525 A
5,000
Cash
100,000 X
12/31/2021
Interest expense
625
Interest payable (CNY)
625
12/31/2021
Foreign exchange gain or loss
20.000
20 000
Note navahle (CNY)
12/31/2021
Interest expense
625
Interest payable (CNY)
625
12/31/2021
Foreign exchange gain or loss
20,000 O
Note payable (CNY)
20,000
9/30/2022
Interest expense
Interest payable (CNY)
Foreign exchange gain or loss
625
Cash
9/30/2022
Foreign exchange gain or loss
Note payable (CNY)
25,000 O
125,000
Cash
150.000
Reauired B
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