Accouting Ination System Chapter 17 ed 12 Solutions.doc

CHAPTER 17DATA MODELING AND DATABASE DESIGNQ17.1The REA data model is used to develop databases that can meet both transaction processing and management analysis needs. Only events that either (1) directly change the quantities of resources, (2) represent commitments to future exchange events, or (3) that provide new information about activities that management wants to plan, evaluate, and control need to be included in such databases. Data processing activities, such as preparing reports or transcribing data from a form, are not explicitly modeled because they do not change information about any resources nor are they fundamental activities which management wants to control. (Consider: How often are managers concerned about how many reports a given employee printed in one day?) Indeed, many administrative data processing activities are not even necessary steps in the value chain. For example, with the advent of sophisticated AIS, particularly ERP systems, many companies are requesting their suppliers to not send them any invoices. This is possible because all the information contained in the vendor invoice is already in the purchasing companys database before the vendor invoice arrives: the quantity ordered is known when the order is placed, as is the quoted price and terms of payment, and the quantity received in good condition is known when the receiving report is stored.17-5Accounting Information SystemsQ17.5 There are asset categories listed on a company balance sheet that would not be presented as a resource on an REA diagram. The most noticeable is Accounts Receivable. Accounts Receivable is merely the difference between amount that a company has sold to a customer and the amount the customer has paid for those sales, and, therefore need not be explicitly modeled as a resource. There are also some resources in an REA model that do not appear on an organizations balance sheet as an asset. A noteworthy example is employee skills. The skills possessed by employees are certainly an economic resource to an organization. These skills would be recorded in a database to facilitate effective management, plan for future hiring and training needs, etc. According to generally accepted accounting principles, however, employee skills are not recorded as an asset in the financial statements. This does not mean that they lack economic value; indeed, the stock market appears to consider intangibles like employee knowledge when determining the market value of a company. P17.1I cannot modify the authors solutions, so please note my corrections. The relationship from sales to cash receipts should be minimum of 1 (not zero). Cash receipts are received at the time of sale.P17.2P17.3P17.4The relationship from purchases to cash disbursement should be a minimum of 1 (not zero). There is no time delay between the time of purchase and the time of payment.P17.6a.A company may receive multiple cash payments on a single sale or a company may receive one payment for several sales. This scenario could take place between any vendor and any customer. The vendor is allowing customers to make multiple payments on a single invoice and is allowing customers to pay for multiple invoices with a single payment. b.A sale can include multiple items, but an item can be included in only one sale. This type of arrangement would involve individual items like art work or automobiles. c.In this scenario some inventory purchases can be paid for with multiple payments, while at times a single disbursement may pay for multiple purchases. This scenario represents a revolving credit plan offered by suppliers.d.In this scenario, inventory purchases are to be paid for with a single payment. For example, a vendor sends a monthly bill for merchandise delivered to a customer. The supplier does not accept or allow installment payments. This is typical for many B2B transactions that involve low-priced items.e.In this scenario a single purchase of inventory is paid for with multiple payments. For example, a car dealership makes installment payments for cars delivered from the manufacturer.f. In this scenario each sale must be preceded by one and only one order. The fact that both the order and sales events are recorded implies that there is probably a time lag between taking the customers order and filling that order, so that the selling organization needs to be able to track the status of orders. An internet sale is an example of this type of scenario. When a customer places an order with A, there is a time lag between the time the order is sent by the customer and the time Amazon fills the order.g. In this scenario each sale can be comprised of multiple orders and each order can be associated with multiple sales. Thus, we have here a situation where probably the selling company batches orders and only ships periodically e.g., with restaurants, suppliers may take orders daily but fill them only on Mondays and Thursdays. Moreover, suppliers may occasionally run out of some items, and, therefore, may make multiple deliveries (sales) to fill a specific order.h. Payment upfront for a single sale similar to the way DELL sells computers; i.e., no installment payments are allowed, the customer must pay in full in advance (prior to shipment). i. In this scenario a sale can include multiple inventory items. Also, a single inventory item can be included in multiple sales. Wal-Mart is a good example. Wal-Mart customers can purchase many inventory items such as detergent, tires, and clothing items. These mass pro