On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two-year, 1,000,000 Chinese yu

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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: Date U.S. Dollar per
Chinese Yuan (CNY) September 30, 2020 $ 0.100 December 31, 2020
0.105 September 30, 2021 0.120 December 31, 2021 0.125 September
30, 2022 0.150 Prepare all journal entries related to this foreign
currency borrowing. 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.