On May 20, 2016, when the spot rate is $1.37/€, a U.S. company buys merchandise from a supplier in Italy, at a cost of €110,000. The spot rate is $1.34/€ on June 30, the company’s year-end. Payment of €110,000 is made on July 30, 2016, when the spot rate is $1.41/€. What is the effect on fiscal 2016 and fiscal 2017 income?

Fiscal 2016	Fiscal 2017
a.	No effect	$4,000 exchange loss
b.	$3,000 exchange loss	$7,000 exchange gain
c.	No effect	$4,000 exchange gain
d.	$3,000 exchange gain	$7,000 exchange loss