978-0134474021 Chapter 19 Solutions Manual Part 3

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19.7 At Big Time University (BTU) students are allowed to purchase two basketball tickets

for each home game. Each ticket contains the date of the game, and the seat information,

such as section, row, and individual seat number. Students pay for each game individually;

that is, student sporting event passes are not used at BTU. BTU deposits the proceeds from

each game into its bank.

REQUIRED

a. Prepare an REA diagram with cardinalities for the revenue cycle for BTU’s basketball

games. State any assumptions you may have to make concerning BTU’s business policies

Table Name Primary Key(s)

Other Attributes (foreign keys in

italics, others in normal font)

Ticket Sales Invoice Number Student Number, Employee Number,

Date, Total Amount

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19.8 Small contractors often rent special equipment for specific jobs. They need to track

the equipment that is rented, when it is returned, and payments made to the rental

company.

REQUIRED

a. Draw a partial REA diagram for the acquisition, payment, and return of rental

equipment. Be sure to include cardinalities and state any assumptions you made

1. Each Rent event is independent of every other Rent event. For example, each time the

2. Each Return Rented Items event is tied to one and only one Rent event. In other words,

3. The contractor pays for the rental at the time of Rent event.

4. The contactor maintains a listing of all types of equipment that they rent. This listing

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Note: An alternative solution would be to model the rental and return of each individual piece of

equipment separately. This would be appropriate if assumption 2 is relaxed and the contractor is

b. Create a set of tables (either on paper or in a relational DBMS to which you have

access) to implement the REA model you developed.

Table Name Primary Key Other attributes (foreign keys)

Rented Equipment Equipment number Description,

Cash GL Account Number Name, beginning balance

Rented Equipment – Return

Rented Items

Equipment number, return

number

quantity

19.9 Answer the following multiple-choice problems.

1. The ABC Company services residential pools. Each week it comes out and cleans the pool. If

necessary, it also replaces any broken equipment. The REA diagram for ABC’s revenue

cycle would show that each service call is linked to ____.

a. a minimum of zero services and a minimum of zero parts

b. a minimum of zero services and a minimum of one part

c. a minimum of one service and a minimum of zero parts

d. a minimum of one service and a minimum of one part

2. The ABC Company rents bicycles. Customers pay a deposit. Upon return, the bike is

checked for damage and customers may be assessed additional fees. If the customer fails to

return the bicycle, ABC charges the cost to replace the bicycle to the same credit card used

to rent the bicycle. The revenue cycle REA diagram for ABC would show that each rental

event is linked to ____.

a. a minimum of zero return events and a minimum of zero receive cash events

b. a minimum of zero return events and a minimum of one receive cash events

c. a minimum of one return event and a minimum of zero receive cash events

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d. a minimum of one return event and a minimum of one receive cash events

3. The ABC Company maintains the following financial accounts: checking, savings, and

investments. It has accounts in several different financial institutions. It does not have a

“Petty Cash” account. ABC Company only maintains information about financial

institutions where it has accounts. The REA diagram for ABC company would model the

relationship between the Cash and Financial Institution entities as having ____.

a. a minimum of zero on both sides of the relationship

b. a minimum of zero on the Cash side of the relationship and a minimum of one on

the Financial Institution side of the relationship

c. a minimum of one on the Cash side of the relationship and a minimum of zero on

the Financial Institution side of the relationship

d. a minimum of one on both sides of the relationship

4. In an REA diagram, the employee entity can be linked to ____.

a. Event entities

b. Resource entities

c. another employee entity

d. all of the above

5. Which Production Cycle entity stores the information about the time employees spend

making products?

a. Work in Process.

b. Job Operations List

c. Perform Job Operations

d. None of the three tables

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SUGGESTED ANSWERS TO THE CASES

Case 19.1 This case involves creating a database from an integrated REA diagram and

then using the REA diagram to guide the writing of queries to prepare financial statements.

Required

a. Create the tables necessary to implement Figure 19-9 in a relational database. Be sure to

include primary keys and other relevant attributes in each table.

Table Name Primary Key(s)

Other Attributes (foreign keys in

italics, others in normal font)

Customer Customer number Name, address, phone, beginning

account balance, credit limit

balance

Equipment Equipment ID Number Description, Cost, Depreciation

Method, Useful Life, Salvage Value,

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Year Acquired, Purchase Order

number, Receiving report number

Acquire Services Service Acquisition number Description, Cost, Check number,

supplier number, employee number,

GL Account number

Materials

and Equipment – Cash

Disbursements

Check number

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Issue Raw Materials –

Raw materials number,

Quantity issued

Receiving Report Number

b. Write the query, or set of queries, necessary to generate as many elements of

financial statements as possible. For example, write the query or set of queries that

would be used to calculate the amount of cash on hand, the total of accounts

receivable, the total value of raw materials, inventory on hand, etc.

The actual syntax will depend on the software used. The following logic describes the queries

that can be used to provide most of the information needed to construct a simple income

statement and balance sheet:

1. To derive total sales you need to query three tables Take Customer Order –

2. To derive total actual Cost of Goods Sold requires assumptions about inventory

costing method (LIFO, FIFO, etc.). However, it is straightforward to calculate the

standard cost of goods sold as follows: query the Finished Goods Inventory, the

3. Only three expenses can be calculated from the model: wages, general

administrative expenses, and depreciation.

a. To calculate wages expense: Sum hours worked (from the Time Worked

b. To calculate general administrative expenses, sum the cost column in the

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c. The Equipment table contains all the information needed to calculate

4. To calculate cash balance first retrieve the sum of the beginning balance attribute

5. To calculate accounts receivable begin by computing the sum of the beginning

6. It is straightforward to calculate the standard cost of ending inventory using the

7. The equipment table has the cost of all equipment. Cumulative depreciation can

8. Accounts payable can be calculated as follows.

a. Begin by retrieving the sum of the beginning balance attribute from the

b. Then calculate the total of all purchases.

i. For equipment, this involves summing the cost attribute for all

ii. For raw materials, this involves several steps. Begin by finding the

iii. For services, this equals the sum of the cost column in the Acquire

c. Then calculate payments to suppliers by summing the amount attribute in

d. Accounts payable = step a + step b – step c

9. Long term debt can be calculated by summing the amount column in the Issue

Debt table.

10. The total par value of common stock can be calculated by summing the product of

par value times number of shares.

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