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1. The currency in which an international subsidiary conducts most of its transactions is its a. Local currency. b. Functional currency. c. Currency of the
1. The currency in which an international subsidiary conducts most of its transactions is its a. Local currency. b. Functional currency. c. Currency of the country where the subsidiary is incorporated. d. Reporting currency. 2. The currency in which an international subsidiary's parent presents its consolidated financial statements is its a. Local currency. b. Functional currency. c. Currency of the country where the parent is incorporated. d. Reporting currency. 3. A U.S. parent has a subsidiary in Canada. Its account balances are measured in Canadian dollars. If the parent's reporting currency is the U.S. dollar and the subsidiary's functional currency is the Canadian dollar, conversion of the subsidiary's accounts to U.S. dollars involves a. Both remeasurement and translation b. Only translation c. Only remeasurement d. No conversion to another currency 4. When trans/ating a subsidiary's accounts to the parent's reporting currency, which of the following transactions, made by the subsidiary, affect its exposure to translation gains and losses? a. Refinancing existing notes payable by issuing more notes payable b. Purchasing equipment for cash. c. Accruing salaries owed at year-end d. Paying cash to invest in equity securities 5. A U.S. parent owns a subsidiary in France, and the subsidiary's accounts are maintained in euros, its functional currency. During the year, the euro has weakened against the U.S. dollar (U.S.\$/ rate has declined). Which one of the subsidiary's transactions below increases the amount of translation losses reported when the subsidiary's accounts are translated to U.S. dollars? a. Inventory purchases b. Salaries expense c. Other comprehensive loss d. Sales revenue
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