Professional Documents
Culture Documents
Chapter 19
Chapter 19
Chapter 19
1 Describe the process for producing various managerial reports, the threats to that process, and
how tools like responsibility accounting and the balanced scorecard can help mitigate those
threats.
1) Which of the following statements about REA modeling and REA diagrams is false?
A) REA is an acronym for Resources, Entities, and Agents.
B) REA data modeling does not include traditional accounting elements such as ledgers, chart of
accounts, debits and credits.
C) REA data modeling could be referred to as an events-based model.
D) REA diagrams must include at least two activities, which together represent a give-get
economic exchange.
Answer: A
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
2) The REA data model approach facilitates efficient operations by all the following except
A) standardizing source document format.
B) identifying non-value-added activities.
C) storing financial and nonfinancial data in the same database.
D) organizing data to simplify data retrieval and analysis.
Answer: A
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
3) The process of defining a database so that it faithfully represents all aspects of the
organization including its interactions with the external environment is called
A) data modeling.
B) data designing.
C) data development.
D) data definition.
Answer: A
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Easy
AACSB: Analytical Thinking
1
Copyright © 2021 Pearson Education, Inc.
4) In which stage(s) of the database design process does data modeling occur?
A) During the systems analysis stage.
B) During the design stage.
C) During both the systems analysis and design stages.
D) After the design stage.
Answer: C
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Easy
AACSB: Analytical Thinking
6) ________ consists of translating the internal-level schema into the actual database structures
that will be
implemented in the new system.
A) Systems analysis
B) Conceptual design
C) Physical design
D) Implementation and conversion
Answer: C
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
7) ________ includes all the activities associated with transferring data from existing systems to
the new database AIS, testing the new system, and training employees how to use it.
A) Systems analysis
B) Conceptual design
C) Physical design
D) Implementation and conversion
Answer: D
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
2
Copyright © 2021 Pearson Education, Inc.
10) Explain specifically what is meant by the following statement: "Accountants can and should
participate in all stages of the database design process."
Answer: Accountants are in a unique position within a business organization. They are
intimately acquainted with the many business transactions that occur in an organization and they
are knowledgeable about the policies and practices of the business itself as well as the
environment within which it operates. The knowledge base and skill set of the accountant should
be put to good use in the development of database design to the fullest extent possible (although
some accountants may not possess AIS coding and development skill sets). Consider that during
the planning stage accountants provide some of the information used to evaluate the feasibility of
the proposed project and they participate in making the decision itself. Accountants can identify
user information needs and develop logical schema during the requirement analysis and design
stages. Accountants can also help test the accuracy of the new database and application programs
during the implementation stage of development. Accountants can also act as "subject matter
experts" since they are knowledgeable users of the new system. They can also serve as managers
of the system once it is up and running.
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
3
Copyright © 2021 Pearson Education, Inc.
11) In which stage(s) of the database design process is the completed data model used?
A) only in the systems analysis stage
B) only in the conceptual design stage
C) in both the systems analysis and design stages
D) neither the systems analysis nor the design stages
Answer: D
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Moderate
AACSB: Analytical Thinking
12) In which stage(s) of the database design process should accountants participate?
A) the systems analysis stage
B) the conceptual design stage
C) the implementation and conversion stage
D) in all of the stages above
Answer: D
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Easy
AACSB: Analytical Thinking
13) With regards to the database design process, accountants may provide the greatest value to
their organization by participating in
A) implementation and conversion.
B) data modeling.
C) database operation and maintenance.
D) system auditing.
Answer: B
Concept: Database design process
Objective: Learning Objective 1
Difficulty: Challenging
AACSB: Analytical Thinking
1) A(n) ________ diagram graphically depicts a database's contents by showing entities and
relationships.
A) data flow
B) flowchart
C) entity-relationship
D) REA
Answer: C
Concept: Entity-relationship diagrams
Objective: Learning Objective 2
Difficulty: Moderate
AACSB: Analytical Thinking
4
Copyright © 2021 Pearson Education, Inc.
4) An entity-relationship diagram
A) can represent the contents of any database.
B) is only used in conjunction with REA models.
C) can show a limited number of entities and relationships.
D) is used only to design new databases.
Answer: A
Concept: Entity-relationship diagrams
Objective: Learning Objective 2
Difficulty: Easy
AACSB: Analytical Thinking
5) Besides modeling entities as rectangles, there are no industry standards for entity-relationship
diagrams.
Answer: TRUE
Concept: Entity-relationship diagrams
Objective: Learning Objective 2
Difficulty: Easy
AACSB: Analytical Thinking
5
Copyright © 2021 Pearson Education, Inc.
9) A graphical depiction of a database's contents showing the various entities being modeled and
the important relationships among them is called a(n)
A) REA diagram.
B) data diagram.
C) ERP diagram.
D) ER diagram.
Answer: D
Concept: Entity-relationship diagrams
Objective: Learning Objective 2
Difficulty: Moderate
AACSB: Analytical Thinking
10) E-R diagrams can be used to represent the contents of any kind of database.
Answer: TRUE
Concept: Entity-relationship diagrams
Objective: Learning Objective 2
Difficulty: Easy
AACSB: Analytical Thinking
6
Copyright © 2021 Pearson Education, Inc.
2) Which of the following is not one of the rules in creating an REA data model?
A) Each event is linked to at least one resource that it affects.
B) Each event is linked to at least one other event.
C) Each event is linked to at least two participating agents.
D) All of the above are important rules.
Answer: D
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Easy
AACSB: Analytical Thinking
7
Copyright © 2021 Pearson Education, Inc.
4) Relationships that affect the quantity of a resource are sometimes referred to as ________
relationships.
A) commitment
B) exchange
C) stockflow
D) duality
Answer: C
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
9) Identify the item below that would be classified as a resource by the REA data model.
A) An IOU from a customer.
B) The customer.
C) A customer sale.
D) A loan from a vendor.
Answer: A
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
10) Identify the item below that would be classified as an event by the REA data model.
A) An IOU from a customer.
B) The customer.
C) A customer sale.
D) A loan from a vendor.
Answer: C
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
11) Identify the item below that would be classified as an agent by the REA data model.
A) An IOU from a customer.
B) The customer.
C) A customer sale.
D) A loan from a vendor.
Answer: B
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
9
Copyright © 2021 Pearson Education, Inc.
12) What is the minimum number of agents that must participate in each REA event?
A) 0
B) 2
C) 1
D) 3
Answer: C
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
13) What is the minimum number of external agents that must participate in each REA event?
A) 0
B) 2
C) 1
D) 3
Answer: A
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Moderate
AACSB: Analytical Thinking
14) Assume that you are looking at a REA diagram that depicts only one event. Which of the
following must be on the REA diagram?
A) An external agent.
B) An internal agent.
C) both A and B
D) neither A nor B
Answer: B
Concept: The REA data model
Objective: Learning Objective 3
Difficulty: Challenging
AACSB: Analytical Thinking
10
Copyright © 2021 Pearson Education, Inc.
2) Identify the notation below that is not used to represent cardinality information.
A) UML.
B) (Min, Max).
C) DFD.
D) Maximums only.
Answer: C
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Analytical Thinking
3) Every citizen in the United States has one social security number, but no two citizens have the
same social security number. Thus, the cardinality that exists between social security numbers
and citizens is
A) one-to-one.
B) one-to-many.
C) many-to-many.
D) many-to-none.
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Reflective Thinking
4) Every person in the world has a birthdate, but no person has more than one birthdate. Thus,
the cardinality that exists between birthdate and people is
A) one-to-one.
B) one-to-many.
C) many-to-many.
D) many-to-none.
Answer: B
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Reflective Thinking
5) Every person in the world can have more than one friend, and each person in the world can be
a friend to more than one person. Thus, the cardinality that exists between friends and people is
A) one-to-one.
B) one-to-many.
C) many-to-many.
D) many-to-none.
Answer: C
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Reflective Thinking
11
Copyright © 2021 Pearson Education, Inc.
6) Every company can have more than one banking relationships, and each bank can have a
business relationship with more than one company. Thus, the cardinality that exists between
company and bank is
A) one-to-one.
B) one-to-many.
C) many-to-many.
D) many-to-none.
Answer: C
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Reflective Thinking
7) An REA diagram must link every event to at least one ________ and two ________.
A) resource; agents
B) agent; resources
C) transaction; entities
D) resource; relationships
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Easy
AACSB: Analytical Thinking
8) What is the standard cardinality pattern for a relationship between an event and an agent?
A) 1:1.
B) 0:1.
C) 0:N.
D) 1:N.
Answer: D
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Reflective Thinking
9) Each event in an REA model will in most cases have at least one ________ agent and one
________ agent involved with the event.
A) internal; resource
B) external; entity
C) internal; employee
D) internal; external
Answer: D
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Easy
AACSB: Analytical Thinking
12
Copyright © 2021 Pearson Education, Inc.
10) Which of the following statements is true about the development of an REA model?
A) Events that pertain to the entry of data are included in the REA model.
B) The objective is to model basic value-chain activities.
C) REA diagrams model individual transactions and data collections.
D) Information retrieval events are modeled as events in the REA model.
Answer: B
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
11) The first step in developing an REA diagram for a specific transaction cycle begins with
identifying
A) relevant events.
B) agents involved.
C) resources affected.
D) relationship cardinalities.
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Easy
AACSB: Analytical Thinking
12) Identify the statement below that is false with respect to cardinalities.
A) Cardinalities describe the nature of the relationship between two entities.
B) No universal standard exists for representing information about cardinalities in REA
diagrams.
C) The minimum cardinality can be zero or one.
D) The maximum cardinality can be zero, one, or many.
Answer: D
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
13
Copyright © 2021 Pearson Education, Inc.
16) Identify the most likely relationship where cardinalities have zero minimums and N
maximums.
A) Agent-event relationship.
B) Resource-event relationship.
C) Event-event relationship.
D) Agent-agent relationship.
Answer: B
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Reflective Thinking
14
Copyright © 2021 Pearson Education, Inc.
19) Which of the following graphical symbols represents a minimum cardinality of zero and a
maximum cardinality of one?
A)
B)
C)
D)
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
20) Which of the following graphical symbols represents a minimum cardinality of zero and a
maximum cardinality of many?
A)
B)
C)
D)
Answer: C
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
15
Copyright © 2021 Pearson Education, Inc.
21) Which of the following graphical symbols represents a minimum cardinality of one and a
maximum cardinality of one?
A)
B)
C)
D)
Answer: B
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
22) Which of the following graphical symbols represents a minimum cardinality of one and a
maximum cardinality of many?
A)
B)
C)
D)
Answer: D
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
16
Copyright © 2021 Pearson Education, Inc.
23) A relationship is diagrammed below using the [Min, Max] notation. Which of the diagrams
below represents the same relationship using the "crow's feet" notation?
A)
B)
C)
D)
Answer: D
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Analytical Thinking
17
Copyright © 2021 Pearson Education, Inc.
24) Helge Autoparts sells new and refurbished auto parts exclusively to auto dealers. Helge
purchases inventory from distributors at trade conventions. Each time Helge makes a purchase,
the company records the suppliers name, address, date, specific items purchased, price paid for
each, and the total amount spent. Helge later researches the inventory items to set the customer
price. The company assigns an inventory number to each item purchased and records the
customer price for each item. Helge buys price tags and display supplies from Alwin
Incorporated, a company that sells them at all trade conventions. All inventory and supplies
purchases are immediately paid for with cash or with checks from a bank account in Helge's
name. All cash received from sales are also deposited to the same bank account. Several times a
year Helge rents display space at dealer conventions. A deposit is always required, and the entire
fee is due the day the convention starts. Helge records the deposit and final payment, along with
the convention's name and address, in the same worksheet on which purchases of inventory and
supplies are recorded.
Consider Helge's processes regarding the purchasing inventory and supplies, renting display
space, and paying for purchased items. A well-designed REA diagram would
A) include eight unique entities.
B) include nine unique entities.
C) include seven unique entities.
D) include ten unique entities.
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Reflective Thinking
18
Copyright © 2021 Pearson Education, Inc.
25) Helge Autoparts sells new and refurbished auto parts exclusively to auto dealers. Helge
purchases inventory from distributors at trade conventions. Each time Helge makes a purchase,
the company records the suppliers name, address, date, specific items purchased, price paid for
each, and the total amount spent. Helge later researches the inventory items to set the customer
price. The company assigns an inventory number to each item purchased and records the
customer price for each item. Helge buys price tags and display supplies from Alwin
Incorporated, a company that sells them at all trade conventions. All inventory and supplies
purchases are immediately paid for with cash or with checks from a bank account in Helge's
name. All cash received from sales are also deposited to the same bank account. Several times a
year Helge rents display space at dealer conventions. A deposit is always required, and the entire
fee is due the day the convention starts. Helge records the deposit and final payment, along with
the convention's name and address, in the same worksheet on which purchases of inventory and
supplies are recorded.
Consider Helge's processes regarding the purchasing inventory and supplies, renting display
space, and paying for purchased items. A well-designed REA diagram would
A) reflect nine 1:N relationships.
B) reflect two M:N relationships.
C) reflect ten 1:N relationships.
D) include two 1:1 relationships.
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Reflective Thinking
19
Copyright © 2021 Pearson Education, Inc.
26) Helge Autoparts sells new and refurbished auto parts exclusively to auto dealers. Helge
purchases inventory from distributors at trade conventions. Each time Helge makes a purchase,
the company records the suppliers name, address, date, specific items purchased, price paid for
each, and the total amount spent. Helge later researches the inventory items to set the customer
price. The company assigns an inventory number to each item purchased and records the
customer price for each item. Helge buys price tags and display supplies from Alwin
Incorporated, a company that sells them at all trade conventions. All inventory and supplies
purchases are immediately paid for with cash or with checks from a bank account in Helge's
name. All cash received from sales are also deposited to the same bank account. Several times a
year Helge rents display space at dealer conventions. A deposit is always required, and the entire
fee is due the day the convention starts. Helge records the deposit and final payment, along with
the convention's name and address, in the same worksheet on which purchases of inventory and
supplies are recorded.
Consider Helge's processes regarding the purchasing inventory and supplies, renting display
space, and paying for purchased items. A well-designed REA diagram would
A) reflect minimum cardinalities of 1 for the relationship between Vendor and Cash
Disbursement entities.
B) reflect the same number of 0 and 1 minimum cardinalities.
C) reflect more maximum cardinalities of M than of 1.
D) reflect maximum cardinalities of M for the relationship between Inventory and Purchase
entities.
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Reflective Thinking
20
Copyright © 2021 Pearson Education, Inc.
27) Helge Autoparts sells new and refurbished auto parts exclusively to auto dealers. Helge
purchases inventory from distributors at trade conventions. Each time Helge makes a purchase,
the company records the suppliers name, address, date, specific items purchased, price paid for
each, and the total amount spent. Helge later researches the inventory items to set the customer
price. The company assigns an inventory number to each item purchased and records the
customer price for each item. Helge buys price tags and display supplies from Alwin
Incorporated, a company that sells them at all trade conventions. All inventory and supplies
purchases are immediately paid for with cash or with checks from a bank account in Helge's
name. All cash received from sales are also deposited to the same bank account. Several times a
year Helge rents display space at dealer conventions. A deposit is always required, and the entire
fee is due the day the convention starts. Helge records the deposit and final payment, along with
the convention's name and address, in the same worksheet on which purchases of inventory and
supplies are recorded.
Consider Helge's processes regarding the purchasing inventory and supplies, renting display
space, and paying for purchased items. In a well-designed REA diagram, what entities would
reflect economic duality?
A) Purchases and Cash Disbursements
B) Display Space Rental and Cash Disbursements
C) Inventory and Purchases
D) Cash and Cash Disbursements
Answer: A
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Challenging
AACSB: Reflective Thinking
21
Copyright © 2021 Pearson Education, Inc.
28) Prescott Dolls sells porcelain dolls exclusively at antique shows. Prescott Dolls purchases
inventory from individuals at garage sales, flea markets, antique malls, and estate sales. Each
time Dahlia Prescott (the owner) makes a purchase, she records the person's name, address, date,
specific items purchased and price paid, and total amount spent. Later at home, Dahlia cleans,
researches and prices the inventory for sale to customers. She assigns an inventory number to
each item and records the "asking" price. Dahlia buys price tags and display supplies from a
company that sells at flea market and antique shows. All inventory and supplies purchases are
immediately paid for using cash or with company checks from a bank account in Prescott Dolls'
name. Cash received from customer sales are also deposited in this account. Three times a year,
Dahlia rents a booth at antique shows. A deposit is always required, with the balance due at the
start of the show. Dahlia records the deposit and final payment, along with the show organizer's
name and address, in the same worksheet on which purchases of inventory and supplies are
recorded.
Draw an REA diagram for Prescott Dolls, related to purchasing inventory and supplies, renting
booths, and paying for all items.
Answer:
22
Copyright © 2021 Pearson Education, Inc.
30) Describe the three basic rules that apply to the REA model pattern.
Answer: Each event is linked to at least one resource that it affects. Each event is linked to at
least one other event. Each event is linked to at least two participating agents.
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Easy
AACSB: Analytical Thinking
32) Explain how an AIS system can be viewed as a set of "give-to-get" exchanges.
Answer: An AIS system can be viewed as a set of "give-to-get" exchanges because such
exchanges reflect the nature of the five transaction cycles: revenue, expenditure, human
resources, production, and financing. In each cycle the organization "gives" some resource in
exchange for another resource (the "get" part of the transaction). The goal is that the "give" part
of the exchange is of lesser value than the "get" portion, thus generating a profit for the
organization. The AIS should capture, record, and organize information relating to any
transaction that occurs within a cycle.
Concept: Developing an REA diagram
Objective: Learning Objective 4
Difficulty: Moderate
AACSB: Analytical Thinking
23
Copyright © 2021 Pearson Education, Inc.
24
Copyright © 2021 Pearson Education, Inc.
35) A dental office employs three dentists and five dental hygienists. One of the dentists is a very
recent dental school graduate and can't yet see patients on her own until she passes boards and
obtains a license. Dentists perform all procedures personally, except for regular cleaning and x-
rays, which are performed exclusively by dental hygienists. Three of the five dental hygienists
perform only regular cleaning and x-rays. The other two hygienists each assist a specific dentist
during procedures, as well as performing regular cleaning and x-rays. One of the hygienists will
be assigned to the new dentist when she begins seeing patients. Hygienists usually 'shadow' other
hygienists and dentists for two weeks prior to seeing patients.
Patients schedule appointments directly with dentists and hygienists, depending on the type of
dental service needed. Patients do not have to choose a dentist until they need service other than
routine cleaning or x-rays. Patients are assigned to a specific dental hygienist when they schedule
their first appointment. The customer master file has 549 records. Diagram the agents described,
relationships between agents, and the cardinality pairs for each relationship.
Answer:
25
Copyright © 2021 Pearson Education, Inc.
5 Read an REA diagram and explain what it reveals about the business activities and policies of
the organization being modeled.
26
Copyright © 2021 Pearson Education, Inc.
27
Copyright © 2021 Pearson Education, Inc.
A) A lumber yard where customers may pay with cash for all purchases.
B) A buy-here-pay-here auto dealer where a car buyer sends monthly cash payments to the
dealer.
C) A consulting firm that offers a variety of consulting services to other businesses.
D) A department store that allows customers to carry a balance and to make installment
payments, if they choose.
Answer: A
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
A) A lumber yard where customers may pay with cash for all purchases.
B) A buy-here-pay-here auto dealer where a car buyer sends monthly cash payments to the
dealer.
C) A consulting firm that offers a variety of consulting services to other businesses.
D) A department store that allows customers to carry a balance and to make installment
payments, if they choose.
Answer: B
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
28
Copyright © 2021 Pearson Education, Inc.
A) A lumber yard where customers may pay with cash for all purchases.
B) A buy-here-pay-here auto dealer where a car buyer sends monthly cash payments to the
dealer.
C) A consulting firm that offers a variety of consulting services to other businesses.
D) A department store that allows customers to carry a balance and to make installment
payments, if they choose.
Answer: C
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
A) A lumber yard where customers may pay with cash for all purchases.
B) A buy-here-pay-here auto dealer where a car buyer sends monthly cash payments to the
dealer.
C) A consulting firm that offers a variety of consulting services to other businesses.
D) A department store that allows customers to carry a balance and to make installment
payments, if they choose.
Answer: D
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
29
Copyright © 2021 Pearson Education, Inc.
A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept
or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply
to multiple purchases.
Answer: B
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept
or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply
to multiple purchases.
Answer: C
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
30
Copyright © 2021 Pearson Education, Inc.
A) Vendors send a bill for each inventory item purchased which is payable on receipt.
B) A single purchase of inventory is paid for with multiple payments.
C) Inventory vendors send a monthly bill for merchandise delivered. The seller does not accept
or allow installment payments.
D) Some inventory purchases are paid for with multiple payments and some payments may apply
to multiple purchases.
Answer: D
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
A) Each sale is associated with a single order, and there is a time lag between the time an order is
taken and delivery of the product.
B) Each sale can be comprised of multiple orders, and each order can be associated with multiple
sales or no sales.
C) Each sale can be comprised of multiple orders, and each order can be associated with one or
more multiple sales.
D) Each sale is associated with a single order and, there is no time lag between the time an order
is taken and delivery of the product.
Answer: A
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
31
Copyright © 2021 Pearson Education, Inc.
A) Each sale is associated with a single order, and there is a time lag between the time an order is
taken and delivery of the product.
B) Each sale can be comprised of multiple orders, and each order can be associated with multiple
sales or no sales.
C) Each sale can be comprised of multiple orders, and each order can be associated with one or
more sales.
D) Each sale is associated with a single order, and there is no time lag between the time an order
is taken and delivery of the product.
Answer: B
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
A) Each sale is associated with a single order, and there is a time lag between the time an order is
taken and delivery of the product.
B) Each sale can be comprised of multiple orders, and each order can be associated with multiple
sales or no sales.
C) Each sale can be comprised of multiple orders, and each order can be associated with one or
more sales.
D) Each sale is associated with a single order, and there is no time lag between the time an order
is taken and delivery of the product.
Answer: C
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
32
Copyright © 2021 Pearson Education, Inc.
A) Each sale is associated with a single order, and there is a time lag between the time an order is
taken and delivery of the product.
B) Each sale can be comprised of multiple orders, and each order can be associated with multiple
sales or no sales.
C) Each sale can be comprised of multiple orders, and each order can be associated with one or
more sales.
D) Each sale is associated with a single order, and there is no time lag between the time an order
is taken and delivery of the product.
Answer: D
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Challenging
AACSB: Reflective Thinking
16) The choice of cardinalities is often arbitrary to reflect facts about the organization being
modeled and its business practices.
Answer: FALSE
Concept: REA diagram and the organization
Objective: Learning Objective 5
Difficulty: Easy
AACSB: Analytical Thinking
33
Copyright © 2021 Pearson Education, Inc.