Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 19.5, Problem 19.14RQ
Summary Introduction

To discuss: The steps to be followed while adjusting a subsidiary's accounts relative to the third parties when that local currency of the subsidiary's is predicted to appreciate in value in relation to the currency of the parent MNC.

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Financial accounting is shaped to a significant extent, by the environment, and in particular all of the following, except Select the correct response: The means of measuring economic activity The overall organization of economic activity in society The many uses and users which it serves The characteristics and limitations of financial accounting and financial statements Statement 1 - A foreign currency transaction is initially recognized by translating the foreign currency amount into the functional currency using the spot exchange rate at the date of the transaction. Statement 2- An entity is required to present its financial statements using its presentation currency (i.e., Philippine pesos). However, whenever needed, the entity may translate its financial statements into any functional currency. Select the correct response: Both statements are incorrect Only statement 1 is correct Only statement 2 is correct Both statements are correct
1. For reporting purposes, currencies are defined as   Operating, International and presentation   Domestic and international   Foreign, functional and presentation   International and functional   2. The functional currency is   Currency in which the entity reports earnings.   The currency in which the entity primarily operates.   The currency in which the entity presents the financial statements.   The currency in which the entity primarily conducts banking activities     3. Which consideration would not be relevant in determining the entity's functional currency?   The currency in which receipts from operating activities are retained.   The currency in which finance or fund is generated   The currency that influences the cost of the entity.   The currency that the most internationally acceptable for trading   4. Under IFRS, how is presentation currency defined?   The currency in which the financial statements are presented.   The currency that uses the current rate   The currency of…
15. What is a subsidiary’s functional currency? A. The parent’s reporting currency. B. The currency in which transactions are denominated. C. The currency in which the entity primarily generates and expends cash. D. Always the currency of the country in which the company has its headquarters.
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