If the local currency of a parent U.S. company is the dollar and the local currency of a Japanese subsidiary is the yen, which currency would be considered the functional currency of the subsidiary company? The dollar. The yen. The currency in which transactions between the two companies are denominated. Either currency, as long as it is properly disclosed and used consistently throughout the statements. Will & Hart Inc., a U.S. company, had the following transactions with foreign companies during Year 1: 1. Purchase of a vehicle directly from a foreign manufacturer for $5,000 less than fair value. 2. Sale of merchandise on credit for 100.000 euros when the spot rate was $1.01. The spot rate at the end of the year is $0.98. The payment for this sale will be made in Year 2. What amount should Will & Hart show as gain (loss) from foreign currency transactions for Year 1? $8,000 $3,000 $2,000 ($3,000)