Factors are used to determine a reporting entity’s functional currency

Question 1 The following information provides an overview of the intercompany sale process using land as an example. On 3/31/X5, Parent Inc. sold land costing $10,000 to its 100% owned subsidiary, Sub Inc., for $15,000. Sale from Sub Inc to outsider for $25,000 Prepare consolidation worksheet entries with and without adjusting the equity method accounts on the following: 1.Consolidation entry(ies) as of 12/31/X5 and 12/31/X6. 2.Consolidation entry at 12/31/X7, assuming that Sub sold the land in 20X7 for $25,000.

Question 2 What factors are used to determine a reporting entity’s functional currency? Provide at least one example for which a company’s local currency may not be its functional currency.

Question 3 Identify the factors causing fluctuations in the exchange rates.