Examine Figure 6.18 , which contains the REA model for Hera Industrial Supply (HIS). The model is partially completed; it includes all entities and relationships, but it does not include cardinalities or descriptions of the relationships (which would appear in diamonds on the connecting lines between entities). HIS sells replacement parts for packaging machinery to companies in several states. HIS accepts orders via telephone, fax, and mail. When an order arrives, one of the salespersons enters it as a sales order. The sales order includes the customer’s name and a list of the inventory items that the customer wants to purchase. This inventory list includes the quantity of each inventory item and the price at which HIS is currently selling the item. When the order is ready to ship, WIS completes an invoice and records the sale. Sometimes, inventory items that a customer has ordered are not in stock. In those cases, HIS will ship partial orders. Customers are expected to pay their invoices within 30 days. Most customers do pay on time; however, some customers make partial payments over two or more months. List each entity in the REA model, and identify it as a resource, event, or agent. Using Microsoft Visio, redraw the REA model to include the diamonds for each relationship and include an appropriate description in each diamond. FIGURE 6.18 Partially Completed REA Model of the Hera Industrial Supply Sales Business

Silver Limited is a manufacturing company that produces furniture. To improve efficiency and usefulness, Silver Limited is constantly incorporating advanced, information technology into its business information systems. When Silver Limited does not have available production capacity, sometimes it purchases furniture from outside suppliers to fulfill customer orders. First, Inventory Control prepares a purchase requisition when inventory approaches the reorder point and sends it to Purchasing and Accounts Payable. Then, Purchasing locates the authorized vendor in the vendor file, prepares a purchase order, and updates the purchase order file. Purchasing then sends the purchase order to Vendor, Receiving, and Accounts Payable. Accounts Payable prepares a summary of all purchase orders issued that day and forwards the total to General Ledger for posting to the GL file. Goods arrive at Receiving with a packing slip. Receiving prepares a receiving report and forwards it with the goods to…

Silver Limited is a manufacturing company that produces furniture. To improve efficiency and usefulness, Silver Limited is constantly incorporating advanced, information technology into its business information systems. When Silver Limited does not have available production capacity, sometimes it purchases furniture from outside suppliers to fulfill customer orders. First, Inventory Control prepares a purchase requisition when inventory approaches the reorder point and sends it to Purchasing and Accounts Payable. Then, Purchasing locates the authorized vendor in the vendor file, prepares a purchase order, and updates the purchase order file. Purchasing then sends the purchase order to Vendor, Receiving, and Accounts Payable. Accounts Payable prepares a summary of all purchase orders issued that day andforwards the total to the General Ledger for posting to the GL file. Goods arrive at Receiving with a packing slip. Receiving prepares a receiving report and forwards it with the goods to…

Consider the following short case as you respond to the question:SPC Corporation sells computer security software. They maintain their AIS using general ledger software; data files are backed up twice a day. Sales staff can access the customer database, inventory files and general ledger, as well as sales-related documents such as invoices and sales orders. Newly hired sales staff members at SPC receive the company procedures manual which explains the process used to complete the steps in the sales/collection process. To minimize costs, SPC designates up to five sales staff members each month who can do credit checks for all new customers in addition to processing sales. SPC bills its clients monthly and uses the balance forward method of accounting for receivables; all cash receipts from clients are processed using a lockbox procedure. The lockbox firm's fee is 3% of all collections. SPC's accounting department estimates bad debts at the end of each fiscal year; they are normally…

Blackmon Company provides locator services to the city transportation departments. Blackmons service involves installing a dedicated hardware transmitter in each city bus. This transmitter provides real-time information to a central logistics center that provides a manager with detailed information as to bus location, speed, current weather, and traffic patterns. The manager can then reroute buses to improve efficiency of operations and increase customer satisfaction. Customers generally sign two separate contracts: one contract governs the sale of the hardware devices, while the second governs the provision of the locator services. On January 1, 2019, a customer purchased Blackmons service by signing a contract for 100 devices for 480,000, the normal selling price. In addition, the customer signed a separate 12-month service contract for 2,000 per month (20 per month per unit, which is the standard selling price for the service). This amount is billed on a monthly basis, and the customer pays for January service on January 31, 2019. The hardware device can only be used with Blackmons services and there are currently no other competitors making devices that work with the Blackmon service. The customer may cancel at any time; however, the amount paid for the device is nonrefundable. The customer is given the right to renew the service contract at the existing rate each December, and the average life of a customer contract is 5 years. The customer takes delivery of the device on January 1, 2019, and begins the locator service on that date. Required: 1. Identify the contract(s) for accounting purposes. 2. How many performance obligations exist? When will the performance obligation(s) be satisfied? 3. Prepare Blackmons journal entries for January 2019. 4. Assume that other competitors sell a similar locator service comparable to Blackmons. Would this fact change your previous answers?

For the following situations, identify whether the description is probably a centralized or decentralized organization. A. Seaside Furniture, a small builder of side tables managed solely by its sole proprietor B. Harbor Marketing, which wants Advertising Team Leaders to be able to respond quickly to needs of potential clients so Team Leaders have the authority to make decisions about advertising and pricing C. Coutures Creations, with a single owner who manages the production, accounting, engineering, sales, and other administrative functions D. British Navy E. McDonalds franchise #3101 in Canton. Ohio F. United States Army

Ohio Logistics manages the logistical activities for firms by matching companies that need products shipped with carriers that can provide the best rates and best service for the companies. Ohio Logistics is very concerned that its carriers deliver their customers material on time, so it carefully monitors the percentage of on-time deliveries. The following table contains a list of the carriers used by Ohio Logistics and the corresponding on-time percentages for the current and previous years. a. Sort the carriers in descending order by their current years percentage of on-time deliveries. Which carrier is providing the best service in the current year? Which carrier is providing the worst service in the current year? b. Calculate the change in percentage of on-time deliveries from the previous to the current year for each carrier. Use Excels conditional formatting to highlight the carriers whose on-time percentage decreased from the previous year to the current year. c. Use Excels conditional formatting tool to create data bars for the change in percentage of on-time deliveries from the previous year to the current year for each carrier calculated in part b. d. Which carriers should Ohio Logistics try to use in the future? Why?

LAWN WIZARD INC. (MANUAL SYSTEM WITH STAND-ALONE PC SUPPORT) Law Wizard Inc. (LWI) is a manufacturer of a range of walk-behind gasoline lawnmowers, which it markets to garden centers and home improvement centers. LWI employs a batch production process whose inventory management, production planning, and accounting procedures consist of a combination of manual activities supported by stand-alone (non-networked) PC technology. The company is experiencing production delays and cost overruns. Its CEO has hired your firm to review its procedures and make recommendations for improving its operations. The batch production process is initiated by receipt of individual customer orders, which are grouped together in batches for manufacturing. The production planning and control clerk enters the orders into the digital production schedule from his department PC and prints two hard-copy work orders. He sends one of these to cost accounting and the other to the production department. The production department supervisor enters the work order into a PC application. The system automatically creates an open work order record and prints the hard-copy move tickets and materials requisitions. The supervisor distributes the move tickets and two copies of the purchase requisitions to each work center invoked in the production process. Work center employees exchange the material requisitions for assembly parts and other materials needed to complete the batch. If additional parts or materials are needed beyond the standard quantity, the supervisor issues additional material requisitions. As the production is completed in each work center, employees record their labor time for each batch on hard-copy job cards, which they send to cost accounting along with the move ticket. Finally, upon completion of the batch, the supervisor closes the open work order file. The storekeeping clerk files one copy of the material requisition in the department and updates the raw materials inventory file from the computer in his office. The manager then sends the second copy of the material requisition to cost accounting. At the end of the day, the manager prepares a hard-copy journal voucher and sends it to the general ledger department. The cost accounting clerk receives the work order and sets up a WIP account for the batch. Throughout the production period, the clerk also receives move tickets, job tickets, and materials requisitions, which she uses to post to WIP. At the end of each day, the cost accounting clerk prepares a hard-copy journal voucher, which she sends to general ledger department. The journal voucher reflects the total value of WIP and transfers to finished good inventory. The general ledger clerk receives the journal vouchers, posts to the appropriate GL accounts, and files the journal vouchers in the department. Required a. Create a system flowchart of the existing system. b. What risks exist in the system as it is currently designed? c. Describe the changes needed to reduce the risks.

Hepworth Credit Corporation is a wholly owned subsidiary of a large manufacturer of computers. Hepworth is in the business of financing computers, software, and other services that the parent corporation sells. Hepworth has two departments that are involved in financing services: the Credit Department and the Business Practices Department. The Credit Department receives requests for financing from field sales representatives, records customer information on a preprinted form, and then enters the information into the computer system to check the creditworthiness of the customer. (Other actions may be taken if the customer is not in the database.) Once creditworthiness information is known, a printout is produced with this information plus other customer-specific information. The completed form is transferred to the Business Practices Department. The Business Practices Department modifies the standard loan covenant as needed (in response to customer request or customer risk profile). When this activity is completed, the loan is priced. This is done by keying information from the partially processed form into a personal computer spreadsheet program. The program provides a recommended interest rate for the loan. Finally, a form specifying the loan terms is attached to the transferred-in document. A copy of the loan-term form is sent to the sales representative and serves as the quote letter. The following cost and service activity data for the Business Practices Department are provided for the month of May: All materials and supplies are used at the end of the process Required: 1. How would you define the output of the Business Practices Department? 2. Using the FIFO method, prepare the following for the Business Practices Department: a. A physical flow schedule b. An equivalent units schedule c. Calculation of unit costs d. Cost of ending work in process and cost of units transferred out e. A cost reconciliation

Slater & Sons Corp manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods. Because of this situation, Slater never closes its books until at least ten days after month end. In this way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not. Drew Bolton, a new accountant, was asked to record about $50,000 in inventory as having been received before month end. He argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. His boss, busy with month-end reports, curtly tells Drew to check the shipping terms. He did so, and found the notation "FOB (free on board) shipper's dock" on…

The following narrative describes the processing of customer mail orders at Eye- Dee- A- Pet, Inc.: Eye- Dee- A- Pet, Inc. is a small manufacturing operation engaged in the selling of digital identification chips that can be implanted into household pets, such as cats and dogs. Customers (e. g., veterinary clinics, animal hospitals) send orders by mail to the sales order department, where sales order clerks open the orders and review them for accuracy. For each order, the clerks enter the customer number, and the computer displays the customer record. The clerk matches the customer information on the screen with the customer order. Assuming that they match, the clerk enters the items and quantities being ordered. The computer edits the order by comparing the input data to customer and inventory master data. Assuming that the order passes the edits, the computer records the order on the sales event data and the sales order master data and then updates the inventory to allocate the…

You have just been hired by Ogden Company to fill a new position that was created in response to rapidgrowth in sales. It is your responsibility to coordinate shipments of finished goods from the factory to distribution warehouses located in various parts of the United States so that goods will be available as ordersare received from customers.The company is unsure how to classify your annual salary in its cost records. The company’s costanalyst says that your salary should be classified as a manufacturing (product) cost; the controller says thatit should be classified as a selling expense; and the president says that it doesn’t matter which way yoursalary cost is classified.Required:1. Which viewpoint is correct? Why?2. From the point of view of the reported net operating income for the year, is the president correct in hisstatement that it doesn’t matter which way your salary cost is classified? Explain.

Solution Summary: The author explains how the REA model helps in re-engineering the accounting system for the computer age.

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