On May 20, 2016, when the spot rate is \($1.28/€,\) a U.S. company buys merchandise from a supplier in Italy, at a cost of €100,000. The spot rate is \($1.25/€\) on June 30, the company’s year-end. Payment of €100,000 is made on July 30, 2016, when the spot rate is \($1.32/€.\) What is the effect on fiscal 2016 and fiscal 2017 income?

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