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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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