Question

A foreign subsidiary's functional currency is its local currency, which has not experienced significant inflation. The weighted average exchange rate for the current year would be the appropriate exchange rate for translating:
Wages Expense Sales to Customers

a) Yes No

b) Yes Yes

c) No Yes

d) No No

Answer 1

Answer:

b) Yes Yes

Explanation:

• Wage expenses are a cost incurred by the companies to pay to the hourly employees and may also include the payroll taxes and the benefits that are paid to the employees. The weighted average exchange rate may vary from one year to another depending on the number of the business days.

• Sales to the customers would also be not affected as the changes in the exchange rates by the foreign subsidy functional currency in ts local currency has not been inflated.