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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Students have asked these similar questions

what are implications for analysis of financial statements that result from the accounting for foreign currency translation?

Which of the following items will result to foreign currency transaction gain/loss due to settlement or remeasurement? Foreign currency denominated non-monetary liabilities such as unearned revenue, warranty liability, premium liability and deferred tax liability. Foreign currency denominated non-monetary assets such as inventory, PPE, intangible asset or prepaid asset. Foreign currency denominated monetary items such as accounts payable, accounts receivable, notes payable, loans receivable or interest payable. Foreign currency denominated income statement accounts such as revenue, income, expense or loss.

which shall be recognized for each item when foreign currency gain or loss that arises from translation of foreign currency denominated transaction to functional currency? a. inventiry b. interest expense c. accounts receivable d. unearned revenue

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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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.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 11 - Prob. 1UTI Ch. 11 - Prob. 2UTI Ch. 11 - Prob. 3UTI Ch. 11 - Prob. 5UTI Ch. 11 - Prob. 1.2E Ch. 11 - Prob. 1.3E Ch. 11 - Prob. 1.4E Ch. 11 - Prob. 4E Ch. 11 - Prob. 6.2E Ch. 11 - Prob. 7E

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.

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.

Explanation of Solution

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Chapter 11 Solutions

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.