Question

17.          Which of the following is not a factor that can be considered in determining a company’s functional currency?

a.            Cash flows related to the foreign entity’s individual assets and liabilities are primarily in the foreign currency and do not directly affect the parent entity’s cash flows.

2. Sales prices for the foreign entity’s products are not primarily responsive on a short-term basis to changes in exchange rates but are determined more by local competition or local government regulation.
3. The sales market is mostly in the parent’s country or sales contracts are denominated in the parent’s currency.
4. Use of a particular currency will minimize fluctuations in profit.

18.          Monetary assets and liabilities are assets and liabilities:

a.            Which include only cash and marketable securities

b.            Which are measured at fair value

c.             Whose amounts are fixed in terms of units of currency by contract or otherwise

d.            All of the above

Answer 1

The answer for Question 17 is

D) Use of a particular currency will minimize fluctuations in profit.

The detailed explanation is attached in below picture,

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