In Which of the Following Circumstances Surrounding a Mexican Subsidiary

question 13

Multiple Choice

In which of the following circumstances surrounding a Mexican subsidiary of an U.S.parent is the peso most likely to be considered the functional currency?

• A)​Sales are made globally and collected in U.S.dollars.Plant uses local materials and labor and pays in pesos.Intercompany transaction volume is high.
• B)​The Mexican subsidiary sells product only in Mexico and receives pesos.The materials and labor are also secured in Mexico and paid for with pesos.
• C)​The Mexican subsidiary receives their debt capital from a U.S.bank in dollars and products produced are sold globally for U.S.dollars.
• D)​Raw materials are acquired from the parent and paid for in U.S.dollars.Labor is acquired locally and paid in pesos.Financing is secured from the parent in U.S.dollars.