ABC Corporation purchased goods from a foreign supplier for €10,000 when the exchange rate was $1.20 per euro. At the year-end, the exchange rate was $1.25 per euro.

Tasks:

1. Calculate the initial cost of the goods in USD.
2. Prepare the journal entry to record the purchase.
3. Adjust the payable for the change in exchange rate at the year-end.
4. Discuss the impact of foreign currency transactions on financial statements.

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