Concept Introduction:
Foreign Exchange Rate: It refers to the price of one currency which is expressed in terms of the currency of another country. In other words, the foreign exchange rate is the rate at which the currency of two countries is exchanged.
To prepare: Journal record to pass entries for the sales and the receipt of payment when exchange rates were changed to $1.35.
Explanation of Solution
Information Assumed:
The exchange rate at the time of purchase was $1.45
Exchange rates were $1.35 at the time of receivables payment
Credit sales of 10,000 pounds
In this situation, Company sold merchandise of amount 10,000 pounds when exchange rates were $1.45 per pound. At the time of cash receipts, the exchange rates were reduced and the company will bear an exchange loss of $1000.
Following are the
| Date | Particulars | Debit | Credit |
| Accounts receivables | $14,500 | ||
| Sales | $14,500 | ||
| Record the sales of 10,000 pounds when exchange rates were $1.45 per pound | |||
| Cash | $13,500 | ||
| Foreign exchange loss | $1,000 | ||
| Accounts receivables | $14,500 | ||
| Record foreign exchange loss at the time of cash receipts on merchandise sale |
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Chapter 15A Solutions
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