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# Journal Entries: preparation, content, purpose and result

I'm trying to do extra exercises in order to be better prepared for my up coming course, which is Financial Analysis. I don't quite understand what exactly I'm supposed to do. Could you please help me and explain in simple terms on the steps I am suppose to do.

For Practice 3-1 and 3-2, do the following for each transaction:
(3-1) The company borrowed \$125,000 in cash from Far West Bank.
(3-2) The company used \$45,000 in cash to purchase land on the west side of Hatu Lake.
a. List the accounts impacted by the transaction.
b. For each account, indicate whether the transaction increased or decreased the account.
c. For each account, indicate how much the transaction increased or decreased the account.
d. Compute the impact of the transaction on total assets, total liabilities, and total owners' equity.

Journal Entries
(3-11) Refer to Practice 3-1. Make a journal entry necessary to record the transaction.

Journal Entries
(3-12) Refer to Practice 3-2. Make the journal entry necessary to record the transaction.

Practice Exercises 3-12, 3-16 (as it relates to 3-11 and 3-12 only), and 3-19 (as it relates to 3.16 only)
Posting (3-16)

Refer to the journal entries made in Practice 3-11. Construct a T-account representing each account impacted by those five transactions. Post all of the journal entries to these T-accounts. Compute the ending balance in each account. Assume that the beginning balance in each T-account is zero.

Preparing a Trial Balance (3-19)
Refer to the T-accounts constructed in Practice 3-16. Using the ending balances in the T-account, construct a trial balance. Note: The only account that is common to these two sets of T-accounts is the cash account; add the two cash account balances together to get the total balance.

Analysis of Journal Entries
The following journal entries are from the books of Kara Elizabeth Company:
a. Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Mortgage Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 55,000
b. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25,000
c. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Loan Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40,000
d. Salary Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
e. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 12,500
f. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 84,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,000
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 51,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 51,000
g. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,000
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,000
h. Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 38,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,000
For each of the journal entries, prepare an explanation of the business event that is being represented.

#### Solution Preview

For (3-1), the problem wants you to think in terms of a journal entry. With the entry in your head (which will be written down in the second part), consider the impact of the entry on the type of account: asset, liability, or equity. Cash will increase, cash is an asset, assets increase ...

#### Solution Summary

The problem asked for an explanation of how to proceed in simple terms. The solution explains how to attack the problem including the 'how' and 'why' of it. The solution does not complete the problem but does explain how to do it.

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