Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar.Which one of the following statements would justify this conclusion?
A) Most of the subsidiary's sales and purchases were with companies in the U.S.
B) Dilty's functional currency is the dollar and Dilty is the parent.
C) Dilty's other subsidiaries all had the dollar as their functional currency.
D) Generally accepted accounting principles require that the subsidiary's functional currency must be the dollar if consolidated financial statements are to be prepared.
E) Dilty is located in the U.S.

Question

Quizplus · Accepted Answer

Most of the subsidiary's sales and purchases being with companies in the U.S. indicates that the economic environment influencing the subsidiary's operations is primarily the U.S. dollar, justifying it as the functional currency.