Answer: US dollar

**Functional Currency Determination:** According to accounting standards (both IFRS and US GAAP), the functional currency is determined based on the primary economic environment in which the entity operates. Key factors include: 1. **Currency that mainly influences sales prices** 2. **Currency of the country whose competitive forces and regulations mainly determine sales prices** 3. **Currency that mainly influences labor, material, and other costs** 4. **Currency in which funds from financing activities are generated** 5. **Currency in which receipts from operating activities are usually retained** **Analysis:** - The subsidiary is located in Mexico - However, it generates **most of its cash in the United States** - This indicates that the US dollar is the primary currency affecting its cash flows and operations - The fact that most cash is generated in USD suggests that sales prices, customer payments, and operating receipts are predominantly in USD Therefore, the functional currency is most likely the **US dollar**, as it represents the primary economic environment in which the subsidiary operates and generates cash flows.

Author: LeetQuiz Editorial Team