The U.S. dollar has been steadily strengthening with respect to the Hong Kong dollar. A U.S. parent has a Hong Kong subsidiary. The subsidiary has positive net assets and its monetary assets are less than its liabilities. The subsidiary's functional currency is the U.S. dollar. Which statement is most likely to be true concerning the gain or loss resulting from conversion of the subsidiary's accounts to U.S. dollars?

Question

Quizplus · Accepted Answer

When the U.S. dollar strengthens and the subsidiary's functional currency is the U.S. dollar, the remeasurement of net monetary liabilities (liabilities greater than assets) will result in a gain reported in income.

The US Dollar Has Been Steadily Strengthening with Respect to the the Hong