1. A U. S. company has a subsidiary in Mexico. If the company's statement of comprehensive income reports a gain for conversion of subsidiary accounts to U. S. dollars in other comprehensive income, the most likely explanation is that: A. The peso has strengthened against the U. S. dollar and the subsidiary's functional currency is the peso. B. The peso has strengthened against the U. S. dollar and the subsidiary's functional currency is the U. S. dollar. C. The peso has weakened against the U. S. dollar and the subsidiary's functional currency is the U. S. dollar. D. The peso has weakened against the U. S. dollar and the subsidiary's functional currency is the peso.

Option A is Correct "The peso has strengthened against the U.S. dollar and the subsidiary's functional currency is the peso".

Explanation:

The U.S. organization has an auxiliary in Mexico shows that U.S. organization is parent organization whose revealing cash is U.S. dollar and money of Maxico (for example nation of backup's organization) is peso. The parent organization solidify the budget reports of its backups and convert the fiscal reports of auxiliaries which are in outside cash to residential nation's money. Right now US organization's salary explanation reports a misfortune for change of backup records to U.S. dollars. On change when the estimation of U.S. dollars gets down against the peso, at that point misfortune on change is accounted for. In this way, the misfortune has happened because of debilitating of the US dollar against the peso that implies the peso has fortified against the U.S. dollar and the auxiliary's practical cash is the peso.