Rosser Company sold supplies in the amount of 25,000 euros to a French company when the exchange rate was $1.21 per euro. At the time of payment, the exchange rate decreased to $0.82. Rosser must record a:

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Rosser Company sold supplies in euros, but its functional currency is the US dollar. Therefore, it must translate the receivable at the initial exchange rate of $1.21 per euro, resulting in a receivable of $30,250 ($25,000 x $1.21).

However, when the French company paid the receivable, the exchange rate decreased to $0.82 per euro. The amount received in US dollars is €25,000 x $0.82 = $20,500.

Rosser had originally recorded the receivable at $30,250 but received only $20,500. Therefore, it incurred a foreign exchange loss of $9,750 ($30,250 - $20,500). The loss must be recorded in the income statement as an expense.

Rosser Company Sold Supplies in the Amount of 25,000 Euros