Chapter 15A, Problem 20QS

To determine

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 journal entries for sales and receipts payment:

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