On November 2, 2016, when the spot rate is $0.13/HK$, a company takes delivery of merchandise priced at HK$1,000,000 from a supplier in Hong Kong.The spot rate is $0.10 on December 31, the company's year-end.Payment of HK$1,000,000 is made on February 1, 2017, when the spot rate is $0.11.

What is the effect of exchange gains and losses on 2016 and 2017 income?

20162017

a.$30,000 exchangeloss$10,000 exchange gain

b.$30,000 exchangegain$10,000 exchange loss

c.Noeffect$20,000 exchange loss

d.Noeffect$20,000 exchange gain