The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases. To indicate: The factors that reflects that the domestic currency of the foreign company is not a functional currency.

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Answer 1

Question

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

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Answer 2

Question

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

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Answer 3

Question

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

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Answer 4

Question

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

Answer 6

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.

Answer 7

Chapter 11, Problem 1UTI

To determine

Concept Introduction:

The functional currency refers to the currency of that country in which entity generates cashflows and spend cash to make purchases.

To indicate:The factors that reflects that the domestic currency of the foreign company is not a functional currency.

Answer 8

Expert Solution & Answer

Explanation of Solution

The entity’s domestic currency is not always considered as functional currency. For instance, if the company in X country borrows funds from the bank of Y country than the currency of Y country is functional currency rather than the currency used in country X.

Some of the major factors which reflects that the currency is not a functional currency are as follows:

Cashflows: If cashflows are generated in other country. For instance, the Country X operates in country Y, then the currency of Country Y will be considered as functional currency.
Financing: Funds procured from other country in their currency.
Sales market: If goods and services are sold in other country at their currency.
Expenses: If goods and services are purchased from other country. For instance, if country X’s domestic currency is dollar and the goods and services bought from country Y is in Yen, then Yen will be the functional currency.