Chapter 1, Problem 8SC

Consider the overall effects of the transactions in questions 5, 6, and 7 on Wave Rider. What is Wave Rider's net income or net loss?

1. a. Net loss of $4,000
2. b. Net income of $46,000
3. c. Net income of $14,000
4. d. It cannot be determined from the data given.

5. Assume that Wave Rider sold skateboards to a department store for $28,000 cash. How would this transaction affect Wave Rider's accounting equation?

1. a. Increase both assets and stockholders' equity by $28,000
2. b. Will not affect the accounting equation because the effects cancel out
3. c. Increase both assets and liabilities by $28,000
4. d. Increase both liabilities and stockholders' equity by $28,000

6. Assume that Wave Rider sold skateboards to another department store for $18,000 on account. Which parts of the accounting equation does a sale on account affect?

1. a. Accounts Payable and Cash
2. b. Accounts Receivable and Retained Earnings
3. c. Accounts Receivable and Accounts Payable
4. d. Accounts Payable and Retained Earnings

7. Assume that Wave Rider paid expenses totaling $32,000. How does this transaction affect Wave Rider's accounting equation?

1. a. Increases assets and decreases liabilities
2. b. Decreases both assets and stockholders' equity
3. c. Increases both assets and stockholders' equity
4. d. Decreases assets and increases liabilities