A sells sports equipment. Both subsidiaries A and B are primarily financed by long-term loans in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A sells sports equipment. Both subsidiaries A and B are primarily financed by long-term loans in CU at market interest rates from the parent. A parent company has two subsidiaries, subsidiary A and subsidiary B. The parent is based in Country X (local currency CU). Subsidiary A is based in Country A (local currency LCA) and subsidiary B is based in Country B (local currency LCB). The parent and subsidiary B sell sports shoes. Subsidiary The parent entity prices its products in CU, most of the parent's customers are based in Country X and revenues are usually collected in CU. The prices of the parent's products are most strongly determined by competition within the local market of Country X and are also affected by legal requirements and economic conditions in Country X. The salaries of employees are paid in CU. Most of the materials and other operating costs are sourced locally and paid in CU. The parent entity enters into a small number of purchase and sale transactions with entities overseas and these transactions are sometimes denominated and settled in a foreign currency. Subsidiary A operates with significant autonomy from the parent. Subsidiary A manufactures its own products and sells them predominantly within Country A, priced in LCA and customers settle in LCA. Management of subsidiary A determines the prices of the sports equipment based on local competition and regulations, without influence from the parent entity. Raw materials and labour are sourced locally. Some specialised machinery is purchased from abroad but the cost of such equipment is low in relation to other costs of producing the sports equipment. Subsidiary A occasionally imports and sells its parent's leading products, but this is only a small part of its business activity. Subsidiary B's main business is to import shoes manufactured by the parent. Subsidiary B pays the parent in CU. The parent entity charges subsidiary B the same price as the parent's own customers, less a discount of 10 per cent. The product is sold in Country B by subsidiary B at prices denominated in LCB. All customers pay in LCB. Subsidiary B's prices are influenced by both local competition and regulations in Country B, and the cost of the product purchased from the parent. Subsidiary B needs the parent entity's approval for any significant price changes that do not reflect a fixed markup on changes in the purchase cost of the parent's products. All operating expenses, except for purchase of the parent's products, are incurred locally and paid in LCB. At the end of the month, any excess proceeds are transferred to the parent after paying the local expenses and the purchase price for the parent's products, as dividends. Required Determine the functional currency of the parent entity and its two subsidiaries. A sells sports equipment. Both subsidiaries A and B are primarily financed by long-term loans in CU at market interest rates from the parent. A parent company has two subsidiaries, subsidiary A and subsidiary B. The parent is based in Country X (local currency CU). Subsidiary A is based in Country A (local currency LCA) and subsidiary B is based in Country B (local currency LCB). The parent and subsidiary B sell sports shoes. Subsidiary The parent entity prices its products in CU, most of the parent's customers are based in Country X and revenues are usually collected in CU. The prices of the parent's products are most strongly determined by competition within the local market of Country X and are also affected by legal requirements and economic conditions in Country X. The salaries of employees are paid in CU. Most of the materials and other operating costs are sourced locally and paid in CU. The parent entity enters into a small number of purchase and sale transactions with entities overseas and these transactions are sometimes denominated and settled in a foreign currency. Subsidiary A operates with significant autonomy from the parent. Subsidiary A manufactures its own products and sells them predominantly within Country A, priced in LCA and customers settle in LCA. Management of subsidiary A determines the prices of the sports equipment based on local competition and regulations, without influence from the parent entity. Raw materials and labour are sourced locally. Some specialised machinery is purchased from abroad but the cost of such equipment is low in relation to other costs of producing the sports equipment. Subsidiary A occasionally imports and sells its parent's leading products, but this is only a small part of its business activity. Subsidiary B's main business is to import shoes manufactured by the parent. Subsidiary B pays the parent in CU. The parent entity charges subsidiary B the same price as the parent's own customers, less a discount of 10 per cent. The product is sold in Country B by subsidiary B at prices denominated in LCB. All customers pay in LCB. Subsidiary B's prices are influenced by both local competition and regulations in Country B, and the cost of the product purchased from the parent. Subsidiary B needs the parent entity's approval for any significant price changes that do not reflect a fixed markup on changes in the purchase cost of the parent's products. All operating expenses, except for purchase of the parent's products, are incurred locally and paid in LCB. At the end of the month, any excess proceeds are transferred to the parent after paying the local expenses and the purchase price for the parent's products, as dividends. Required Determine the functional currency of the parent entity and its two subsidiaries.
Expert Answer:
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
Students also viewed these accounting questions
-
Majority of the business operations of Healthy Ltd are in Malaysia hence Ringgit Malaysia (RM) is the functional currency. The company year-end is on 31 March. There was a foreign currency...
-
a) Sunshine, a private limited company, has two overseas subsidiaries, Osako and Cancelo. Sunshine is based in a country which has a currency of the dollar. Osako is based in Japan where the currency...
-
Return to Better Mousetraps in Problem 18. Suppose the firm can cut its requirements for working capital in half by using better inventory control systems. By how much will this increase project NPV?...
-
Use ionization energy and electron affinity values (see Table 8.3) to calculate the energychange (in kJ/mol) for the following reactions: (a) Li(g) + I(g) Li+ (g) + I - (g) (b) Na(g) + F(g) Na+ (g)...
-
Max Peney owns Peney's Sneaker Shop. (Balances as of August 1 are provided for the accounts receivable and general ledger accounts as follows: Donovan, $375 Dr.; Littler, $900 Dr.; Pry, $750 Dr.;...
-
A table sits on the floor, and a vase containing water and flowers sits on top of the table. All objects are at rest. Identify all forces exerted on the table, and describe how these forces are...
-
Classification of Long-Term Liabilities Which of the following would normally be included in the Long-Term Liability category of the balance sheet? Accounts Payable Bonds Payable Accrued Expenses...
-
Identify your data analytics project topic with HP ( Hewlett-Packard ) What is a known or possible business problem? Translate the business problem into a research question that could help solve the...
-
a) Use the Laplace transform on the second order ODE, y" (t) + ay'(t) + by(t) = q(t), y(0) = u, y'(0) = v, a, b e R, > to show that u(s + a) + v + L(q(t)) Y(s) := L(y(t)) = a? (s + ) + b 4 b) Show...
-
What difference does it make to the poem's meaning that "Umpaowastewin" by Margaret Noodin is also in Anishinaabemowin? What does it have to do with making jam? Explain
-
The fastest man-made object is the parker solar probe, itsmaximum speed record is 430,000 mph. It the probe maintained thatspeed for a year (it wont), how much time does it lose compared toan...
-
5 The Evan ec Company's D = 2.62 } its (an be sold to net $28 next expected dividend growth rate is 7% and its Common stock now sells for 35 New stock per share of retained a) what is Evanec's cost...
-
A corporation purchases several new 5- and 7-year class personal property items throughout the current year. If the corporation wishes to take the maximum Code Sec. 179 deduction for the current...
-
Suppose Garageband.com has a 28% cost of equity capital and a 10% cost of debt capital. The firm's debt-to-equity ratio is 1.5. Garageband is interested in investing in a telecomm project that will...
-
Johnson controls will increase capital investments to approximately $1.7 billion. More than 70% of the company's capital expenditures in 2012 are associated with growth and margin expansion...
-
Which of the followingcarbocations is the least stable? CH3CH2 . CH3CHCH3 CH3 I . CH3C0 T CH3 IV. V. CH3 CH3CCH2 CH3
-
What specific functions should an HR unit carry out? What HR functions would then be carried out by supervisors and other line managers? What role should the Internet play in the new HR organization?
-
Explain what HR management is and how it relates to the management process.
-
From a practical point of view, why is it important for all managers and future managers to have a good command of human resource management concepts and techniques?
Study smarter with the SolutionInn App