Chapter 06

Purchases and Payments Business Process

True / False Questions

1.

The Purchase Orders table would have five foreign keys.

True False

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2.

The Cash Disbursements table would have three foreign keys.

True False

3.

The association between Purchase Orders and Products would be implemented with a linking
table.

True False

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4.

The association between Purchase Orders and Cash Disbursements would be implemented with a
linking table.

True False

5.

The Purchase Orders table would contain two foreign keys to implement the associations with
Employees.

True False

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6.

The Purchases table would have four foreign keys.

True False

7.

The associate between Purchase Orders and Purchases would be implemented with a linking
table.

True False

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8.

The Purchase Orders table would have the same foreign keys as the Purchases table.

True False

9.

Each Purchase Order would be ultimately linked to one cash disbursement.

True False

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10.

The Cash Disbursements table would have three foreign keys.

True False

11.

The Products table would include a foreign key to link it to Product Categories.

True False

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12.

The association between Purchase Orders and Cash Disbursements could be implemented with a
foreign key in either table but not both.

True False

13.

The linking table between Supplier Categories and Product Categories would contain the attribute
summarizing year-to-date purchases for each supplier category and product category
combination.

True False

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14.

The linking table between Purchase Orders and Products would likely indicate the quantity of each
product ordered and the quantity of each product received.

True False

15.

A query using Purchase Orders and Cash Disbursements could report accounts payable by
showing records where the foreign key was NULL (blank).

True False

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Multiple Choice Questions

16. Many companies record both purchase orders and purchases; when would such a company
recognize the purchase?

A. When the purchase order is issued.

B. When the supplier receives the purchase order.
C. When the products are received from the supplier and accepted.
D. When the products are sold.

17. In a BPMN collaboration model of the purchase process, one pool describes the focal
organization's activities and the other pool describes what?

A. The supplier's activities

B. The customer's activities
C. The sequence of steps in the process
D. The message flows between the pools

18. In a BPMN collaboration model of the purchase process, which of the following is the appropriate
term for the message flows between pools?

A. Orchestration
B. Choreography
C. Collaboration
D. Intermediate events

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19. In a BPMN collaboration model of the purchase process, which of the following best describes the
purpose of swimlanes is which of the following?

A. Capturing the process complexity

B. Clarifying the interaction between pools
C. Showing the sequence of activities in a pool
D. Showing different jobs in the purchase process

20. In a BPMN activity diagram, which of the following best describes the purpose of an intermediate
timer event?

A. Represent a time delay

B. Indicates a delay to a specific date/time
C. Indicates a delay to a relative date, such as next Thursday
D. All of the above

21. Which of the following least reflects the purpose of a business rule in the purchase process?

A. Ensure suppliers are paid on time

B. Require segregation of order, receiving, and payment duties
C. Ensure suppliers are satisfied
D. Ensure an audit trail

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22. Review the following diagram. Which answer provides the best interpretation of the multiplicities
for the association between the Purchases and Cash Disbursements classes?

A. Each supplier must be paid for the purchases from that supplier
B. Disbursements are made after the purchases are recorded
C. One purchase can result in multiple payments to the supplier
D. Each check written to the supplier is for one specific purchase

23. Review the following diagram. Which answer provides the best interpretation of the multiplicities
for the association between the Purchases and Products classes?

A. Each purchase order specifies many products

B. Each purchase is for one product
C. Each purchase can include many products
D. Checks are written after products are added to inventory

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24. Review the following diagram. Which answer provides the best interpretation of the multiplicities
for the association between the Sunset Partners and Supplier Categories classes?

A. Each partner can be assigned to manage many supplier categories

B. Each partner can only purchase products from one supplier category
C. Each supplier category is managed by several partners
D. Each supplier is linked to one partner

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25. Review the following diagram. Which answer provides the best interpretation of the multiplicities
for the association between the Product Categories and Supplier Categories classes?

A. Each partner can only purchase products from one supplier category and for one product
category.
B. Every supplier and product category can be managed by several partners, but no partner
manages both.
C. Some partners may manage several product categories, and some partners may manage
several supplier categories, but there is no direct link between supplier and product categories.
D. Supplier and product category information can be used to calculate year-to-date sales for each
product/supplier category combination.

Essay Questions

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26. La Jolla Management Company (LJMC) manages several apartment complexes and earns revenues
by renting out the apartments in those complexes. LJMC assigns an agent/manager (employee) to
each complex (one manager can manage several complexes) to handle day-to-day operations,
such as maintaining the property, advertising, and signing rental contracts. This case describes the
purchase of maintenance service process.

Complexes and apartments. LJMC has acquired fifteen and built several more new apartment
complexes over the last two years. It identifies complexes by unique name and apartments by the
combination of the complex name and apartment #. LJMC categorizes each apartment according
to the number of bedrooms and bathrooms, as well as other factors. There are more than 20
apartment categories at present, each identified by unique category #. Since each complex
presents a unique set of luxury appointments and amenities, LJMC determines the standard
monthly rental fee by considering both the apartment category and complex, for example 2
bedroom 1 bath apartments (category 21) rent for $1850 per month in the El Dorado Arms
complex (where there is no view and the complex is close to a freeway) but the same category
apartments rent for $2850 per month in the La Jolla Cove complex (where there is a view of the
ocean from most apartments in the complex).

Maintenance Jobs. LJMC keeps its apartments and complexes in top condition. The LJMC complex
managers monitor the condition of the facilities. Whenever the condition falls below LJMC
standards, the managers hire contractors to bring the apartment back up to specification. LJMC
classifies each maintenance job by job type, and the managers match the job type to the
contractor type that can best perform the job. The LJMC manager then selects one specific
contractor for the job from that contractor type. Each contractor may belong to several contractor
types. Each maintenance job involves either one apartment or the common areas of the complex.
LJMC tracks the maintenance performed on apartments and complex common areas. LJMC pays
its contractors in full at the end of the month for all jobs that the contractor performed during the
month.

Other Information. Agents, resources, and type images may be recorded in the database before
they are linked to other classes. LJMC tracks all its employees in one employee class.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support La Jolla Management Company's process using all the attributes. Name each
table and clearly identify primary keys with PK and foreign keys with FK. List your tables in the
following order: RESOURCES, EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the
following list of attributes (remember that there should be no classes without attributes).

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 Attributes

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27. Pacific Green Company (PGC) provides landscaping services to individual and corporate customers
in southern California. Heather F originally founded PGC as a lawn mowing service while she
attended graduate school. It became so successful that she delayed her teaching career to
concentrate on building the company. This case describes PGC's processes for leasing trucks,
maintaining trucks, and purchasing plants.

Inventories. PGC maintains an inventory of trucks of all sizes to support various landscaping
requirements (the acquisition of trucks are outside the scope of this case). PGC tracks the trucks by
vehicle identification numbers (VINs) and keeps meticulous records on each truck. For example,
they track the mileage for each truck on each landscaping job. Additionally, they track the
maintenance history for each truck. Each type of truck has a different use and hauling capacity, but
each truck in a particular truck type has the same use and hauling capacity.

PGC also maintains an extensive inventory of plants, ranging from colorful flowers to large trees,
so they can address almost any landscaping requirement on short notice. Since the common name
of many plants vary by region, PGC tracks its plant inventory by scientific names (i.e., the Latin
names). To manage the plant inventory and ensure that the best plants are applied to job
conditions, Heather categorizes all plants by plant type.

Truck Leases. PGC leases all its trucks from local dealers. PGC purchasing agents negotiate the
leases. Each lease involves only one truck due to the state registration requirements. The dealers
require a down payment at the time a lease is signed, and then PGC makes payments monthly
over the life of the lease. Although PGC usually turns in the trucks at the end of the lease,
occasionally, PGC will sign a new lease for an existing truck when that truck provides unusual
capability or has relatively low mileage.

Truck Maintenance. PGC contracts for truck maintenance with local truck repair shops. A
purchasing agent will negotiate a truck maintenance contract for each type of truck with a truck
repair shop that specializes in those types of trucks. Then, PGC takes its trucks to the contracted
shops when maintenance is required. A PGC purchasing agent approves each maintenance invoice
after carefully checking it against the contract terms and assigns a purchase number to track the
purchase of maintenance. A PGC cashier pays the truck maintenance vendors monthly for all the
maintenance invoices received during the month.

Plant purchases. PGC buys its plants in bulk to keep its plant inventory well stocked. Because PGC
has an excellent relationship with its plant vendors, it places informal orders by phone. When the
plants are delivered and accepted, PGC assigns a purchase number to each receipt. PGC cashiers
pay for plant purchases within 30 days of the delivery. PGC cashiers occasionally combine
payments if there are multiple deliveries from the same vendor within a short period of time.

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 Employees. PGC keeps all employee information together (your model should show one Employee
class). They track each employee's qualifications according to category: purchasing agent, cashier,
landscaping laborer, truck driver, supervisor, etc. An employee is considered qualified when he or
she reaches the number of training hours required for that category. However, each employee can
hold qualifications for several categories, for example an employee qualified as a purchasing agent
could also be qualified as a truck driver.

Vendors. PGC keeps all vendor information together (your model should show one Vendor class).
However, they classify the vendors by type: truck dealer, truck repair shop, plant vendor, etc.

Miscellaneous. You may assume that all agent, resource, and type image information is entered
into the database before any process activity takes place.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support PGC's processes using all the attributes. Name each table and clearly identify
primary keys with PK and foreign keys with FK. List your tables in the following order: RESOURCES,
EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the following list of attributes (remember
that there should be no classes without attributes).

Attributes:

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28. Pacific Green Company (PGC) provides landscaping services to individual and corporate customers
in southern California. Heather F originally founded PGC as a lawn mowing service while she
attended graduate school. It became so successful that she delayed her teaching career to
concentrate on building the company. This case describes PGC's processes for maintaining trucks.

PGC contracts for truck maintenance with local truck repair shops. A purchasing agent will
negotiate a truck maintenance contract for each type of truck with a truck repair shop that
specializes in those types of trucks. If the purchasing agent cannot negotiate satisfactory contract
terms, the contracting process terminates. The process then starts over until contracts are in place.

When trucks are due for maintenance or repair, a PGC truck driver takes its trucks to the
contracted shops. A PGC purchasing agent approves each maintenance invoice after carefully
checking it against the contract terms and to confirm that the required maintenance or repairs are
made. If the maintenance complies and the repairs were satisfactorily performed, PGC assigns a
purchase number to track the purchase of maintenance. A PGC cashier then pays the truck
maintenance vendors. If the invoice does not comply with the terms of the contract, the PGC
purchasing agent returns the invoice for correction. If the repairs are not satisfactory, the
purchasing agent takes the truck back so the shop can perform the repairs or maintenance
satisfactorily.

REQUIRED: Using the description above, correct the following BPMN activity diagram to accurately
depict the PGC truck contracting and maintenance process.

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29. Integrated Case combining both sales and purchases processes.

Background: When Arnold retired from politics after the state budget crises of 2008, 2009, and
2010 he found that the downturn in the overall economy had affected his retirement plans. Plus, he
needs money for his divorce from Maria while his new movies are still in production. So, he
decided to open a unique health spa that will cater to movie stars and other wealthy clients. Taking
advantage of the historically low mortgage rates, he acquired an impressive estate in Rancho Palos
Verdes overlooking the Pacific Ocean and converted it into an expensive spa. After some extensive
market research and a number of personal visits to other spas (it was a tough job but someone
had to do it), he opened Arnold's California Spa offering a variety of activities (such as golf, Pilates,
yoga, massage, mud baths, aerobics, weight lifting, dodge ball, etc.) so clients have the option of
either 1) getting physically fit with the latest in exercise technology or 2) just relaxing in luxury. His
spa quickly became extremely successful and he plans to expand to other cities. Arnold realizes
that his business needs an accounting system, and he has asked you to analyze his requirements
and help him design a system that can grow along with his business.

Arnold's business requirements: During your interview with Arnold, he describes his business
requirements for his purchasing and sales processes as follows:

Spa Packages. We offer our clients a selection of spa packages that changes according to the time
of year and customer demand. For example, we might offer the Spring Getaway Package, the
Relaxing Escape from the Economy Package , the Pure Indulgence Package, the Sports Package,
and the Steroid-Free Bodybuilding Package. Each package includes several activities, such as
weight lifting, aerobics, Pilates, mountain biking, yoga, tennis, golf, various skin care therapies,
hydrotherapies, body therapies, and massage.

The price of each spa package depends on the specific activities included in the package. For
example, the Steroid-Free Bodybuilding Package includes weight lifting, yoga, dodge ball, and
scientifically designed ice baths to restore the muscles. Each activity could appear multiple times in
each spa package, for example we could include two rounds of golf in one package. Of course,
each activity is included in multiple spa packages.

We set the price of each spa package by first determining what we want to charge for each of the
activities depending on the time of year, the products used in the activity, and expected popularity.
We then add up the charges for each activity to form the overall price for the spa package;
however, the clients only see one single price for the whole package. To monitor profitability, we
track year-to-date sales information for each activity included in any spa package.

Sales process (spa visits): Arnold's California Spa emphasizes customer service, of course. Each

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 client makes reservations in advance, and one reservation could schedule several future spa visits
(each individual spa visit involves only one spa package, but the client could select a different spa
package for each visit). When the client arrives for a spa visit, we assign one of our employees to
be responsible for the client and direct all the client's activities for that visit. This responsibility only
applies to the specific visit. Other employees will also be involved in the spa visit depending upon
the activities included in the specific spa package that the client selected. For example, the visit
director may conduct a golf lesson for the client while an assisting employee may provide a
therapeutic massage for the client's guest (to maintain appropriate discretion, we don't track
clients' guests). We expect our employees to provide the highest quality customer service and we
plan to hold them accountable. Since all of our employees will be able to be visit directors, we
want to track who directs and who assists with each specific visit as well as the number of hours
they spend with the client.

Since most clients love their experience and want to return, we offer them an opportunity to
become members of Arnold's Entourage. Entourage members earn membership rewards based on
the number of visits and the amounts spent. Entourage members also get priority reservations and
can pay for visits over time with regular monthly payments, where the number of payments
depends on their membership group: bronze, silver, or gold. Since an Entourage member could
visit several times while also making payments for prior visits, each client payment could apply to
several spa visits. Clients that are not Entourage members must pay for each spa visit in full at the
time of the visit. To plan for future marketing, we track year-to-date spending for each
combination of Entourage Group and activity, so we can see which activities appeal to which
membership group.

Product Inventory and purchasing. We maintain an inventory of productssuch as sports gear,

towels, robes, shampoos, golf balls, body-wrap material, seaweed, massage oils, bodybuilding
supplements, raw fruit juices, and vitamins that we use in the spa visits. We record the quantity
and cost of each product used in a spa visit as well as the total costs for each visit to determine
profitability. For planning, we also track which products are used in each activity, although many
products are used in multiple activities. We estimate the quantity and cost of each product used in
each activity, which then allows us to estimate the overall cost of each activity, so we can decide
what to charge for the activity when it is offered in any spa package.

We buy our products from a number of vendors. We've already worked out agreements for them
to deliver products on a regular basis. We record purchases by purchase number when they
deliver the products. All our vendors require payment in full within 30 days after we receive the
products, but depending on timing, we may issue one check to pay for multiple purchases from a
vendor.

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 Other information. We record information about activities before they are offered in any spa
package, and we add new spa packages before any client purchases them. We have a payroll
service that handles all our payroll needs, so you don't need to consider payroll in your analysis.
We assign each employee an employee number and a job title, like "master masseuse", "yoga
instructor supervisor", "hair styling specialist" and "the guy who will pump you up." However, every
employee can perform several different jobs at the spa, so we keep all the employee information
in one set of records. We only use the title to impress our clients and not for any real business
purpose (we don't categorize employees by employee types). We record information about all
agents, resources, and type images before they are linked to other classes.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support Arnold's California Spa processes using all the attributes. Name each table
and clearly identify primary keys with PK and foreign keys with FK. List your tables in the following
order: RESOURCES, EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the following list of
attributes (remember that there should be no classes without attributes).

6-22
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 Chapter 06 Purchases and Payments Business Process Answer Key

True / False Questions

1.

The Purchase Orders table would have five foreign keys.

FALSE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-23
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McGraw-Hill Education.
2.

The Cash Disbursements table would have three foreign keys.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-24
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McGraw-Hill Education.
3.

The association between Purchase Orders and Products would be implemented with a linking
table.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-25
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McGraw-Hill Education.
4.

The association between Purchase Orders and Cash Disbursements would be implemented with
a linking table.

FALSE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-26
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McGraw-Hill Education.
5.

The Purchase Orders table would contain two foreign keys to implement the associations with
Employees.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-27
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McGraw-Hill Education.
6.

The Purchases table would have four foreign keys.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-28
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McGraw-Hill Education.
7.

The associate between Purchase Orders and Purchases would be implemented with a linking
table.

FALSE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-29
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8.

The Purchase Orders table would have the same foreign keys as the Purchases table.

FALSE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

9.

Each Purchase Order would be ultimately linked to one cash disbursement.

FALSE

AACSB: Analytic

6-30
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 AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

10.

The Cash Disbursements table would have three foreign keys.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-31
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11.

The Products table would include a foreign key to link it to Product Categories.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-32
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12.

The association between Purchase Orders and Cash Disbursements could be implemented with
a foreign key in either table but not both.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-33
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13.

The linking table between Supplier Categories and Product Categories would contain the
attribute summarizing year-to-date purchases for each supplier category and product category
combination.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-34
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14.

The linking table between Purchase Orders and Products would likely indicate the quantity of
each product ordered and the quantity of each product received.

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-35
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15.

A query using Purchase Orders and Cash Disbursements could report accounts payable by
showing records where the foreign key was NULL (blank).

TRUE

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-06 Implement a relational database from the UML class diagram of the purchase and payment process.
Source: Original
Topic: Purchases and Payments

Multiple Choice Questions

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16. Many companies record both purchase orders and purchases; when would such a company
recognize the purchase?

A. When the purchase order is issued.

B. When the supplier receives the purchase order.
C. When the products are received from the supplier and accepted.
D. When the products are sold.

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-01 Describe the business activities that comprise the purchase and payment process.
Source: Original
Topic: Purchases and Payments

17. In a BPMN collaboration model of the purchase process, one pool describes the focal
organization's activities and the other pool describes what?

A. The supplier's activities

B. The customer's activities
C. The sequence of steps in the process
D. The message flows between the pools

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-02 Develop an activity model of the purchase and payment process using BPMN.
Source: Original
Topic: Purchases and Payments

6-37
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McGraw-Hill Education.
18. In a BPMN collaboration model of the purchase process, which of the following is the
appropriate term for the message flows between pools?

A. Orchestration
B. Choreography
C. Collaboration
D. Intermediate events

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Understand and apply different activity modeling options.
Source: Original
Topic: Purchases and Payments

19. In a BPMN collaboration model of the purchase process, which of the following best describes
the purpose of swimlanes is which of the following?

A. Capturing the process complexity

B. Clarifying the interaction between pools
C. Showing the sequence of activities in a pool
D. Showing different jobs in the purchase process

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Understand and apply different activity modeling options.
Source: Original
Topic: Purchases and Payments

6-38
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McGraw-Hill Education.
20. In a BPMN activity diagram, which of the following best describes the purpose of an
intermediate timer event?

A. Represent a time delay

B. Indicates a delay to a specific date/time
C. Indicates a delay to a relative date, such as next Thursday
D. All of the above

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Understand and apply different activity modeling options.
Source: Original
Topic: Purchases and Payments

21. Which of the following least reflects the purpose of a business rule in the purchase process?

A. Ensure suppliers are paid on time

B. Require segregation of order, receiving, and payment duties
C. Ensure suppliers are satisfied
D. Ensure an audit trail

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Develop business rules to implement controls for the purchase and payment process.
Source: Original
Topic: Purchases and Payments

6-39
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McGraw-Hill Education.
22. Review the following diagram. Which answer provides the best interpretation of the
multiplicities for the association between the Purchases and Cash Disbursements classes?

A. Each supplier must be paid for the purchases from that supplier
B. Disbursements are made after the purchases are recorded
C. One purchase can result in multiple payments to the supplier
D. Each check written to the supplier is for one specific purchase

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

6-40
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McGraw-Hill Education.
23. Review the following diagram. Which answer provides the best interpretation of the
multiplicities for the association between the Purchases and Products classes?

A. Each purchase order specifies many products

B. Each purchase is for one product
C. Each purchase can include many products
D. Checks are written after products are added to inventory

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

6-41
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McGraw-Hill Education.
24. Review the following diagram. Which answer provides the best interpretation of the
multiplicities for the association between the Sunset Partners and Supplier Categories classes?

A. Each partner can be assigned to manage many supplier categories

B. Each partner can only purchase products from one supplier category
C. Each supplier category is managed by several partners
D. Each supplier is linked to one partner

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

6-42
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McGraw-Hill Education.
25. Review the following diagram. Which answer provides the best interpretation of the
multiplicities for the association between the Product Categories and Supplier Categories
classes?

A. Each partner can only purchase products from one supplier category and for one product
category.
B. Every supplier and product category can be managed by several partners, but no partner
manages both.
C. Some partners may manage several product categories, and some partners may manage
several supplier categories, but there is no direct link between supplier and product
categories.
D. Supplier and product category information can be used to calculate year-to-date sales for
each product/supplier category combination.

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

Essay Questions

6-43
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26. La Jolla Management Company (LJMC) manages several apartment complexes and earns
revenues by renting out the apartments in those complexes. LJMC assigns an agent/manager
(employee) to each complex (one manager can manage several complexes) to handle day-to-
day operations, such as maintaining the property, advertising, and signing rental contracts. This
case describes the purchase of maintenance service process.

Complexes and apartments. LJMC has acquired fifteen and built several more new apartment
complexes over the last two years. It identifies complexes by unique name and apartments by
the combination of the complex name and apartment #. LJMC categorizes each apartment
according to the number of bedrooms and bathrooms, as well as other factors. There are more
than 20 apartment categories at present, each identified by unique category #. Since each
complex presents a unique set of luxury appointments and amenities, LJMC determines the
standard monthly rental fee by considering both the apartment category and complex, for
example 2 bedroom 1 bath apartments (category 21) rent for $1850 per month in the El Dorado
Arms complex (where there is no view and the complex is close to a freeway) but the same
category apartments rent for $2850 per month in the La Jolla Cove complex (where there is a
view of the ocean from most apartments in the complex).

Maintenance Jobs. LJMC keeps its apartments and complexes in top condition. The LJMC
complex managers monitor the condition of the facilities. Whenever the condition falls below
LJMC standards, the managers hire contractors to bring the apartment back up to specification.
LJMC classifies each maintenance job by job type, and the managers match the job type to the
contractor type that can best perform the job. The LJMC manager then selects one specific
contractor for the job from that contractor type. Each contractor may belong to several
contractor types. Each maintenance job involves either one apartment or the common areas of
the complex. LJMC tracks the maintenance performed on apartments and complex common
areas. LJMC pays its contractors in full at the end of the month for all jobs that the contractor
performed during the month.

Other Information. Agents, resources, and type images may be recorded in the database before
they are linked to other classes. LJMC tracks all its employees in one employee class.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support La Jolla Management Company's process using all the attributes. Name
each table and clearly identify primary keys with PK and foreign keys with FK. List your tables in
the following order: RESOURCES, EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the
following list of attributes (remember that there should be no classes without attributes).

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McGraw-Hill Education.
 Attributes

Diagram:

Table listing:

Resources
Apartment Complex = apartment complex name (PK), address, date constructed, total square
footage, employee # (manager)
Apartments = complex name + apartment # (PK), apartment square footage, count of rooms in
apartment, apartment category (FK)
Cash = bank account # (PK), bank account balance

Events

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McGraw-Hill Education.
 Maintenance Job = maintenance job # (PK), projected completion date of job, actual
completion date of job, actual cost of this job, job type (FK), employee # (FK), contractor # (FK),
complex name (FK), apartment # (FK), check # (FK)
Cash disbursement = check # (PK), check date, check amount, bank account # (FK), employee #
(FK), contractor # (FK)

Agents
Contractor = contractor # (PK), contractor name, contractor quality rating, phone
Employee = employee # (PK), employee name, employee hire date

Type Images
Job Type = job type (PK), standard cost for this job type, YTD $ spent on this job type
Contractor Type = contractor type (PK), count of this type of contractor
Apartment Category = apartment category # (PK), number of bedrooms for apartments in this
category, number of bathrooms for apartments in this category, count of available apartments
in this category

Linking Tables
Job Type - Contractor Type = job type + contractor type (PK)
Contractor Type - Contractor = contractor type + contractor # (PK)
Apartment Category - Building = apt category # + complex name (PK)
Job Type - Complex = complex name + job type (PK), YTD $ spent on this job type in this
complex

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

6-46
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McGraw-Hill Education.
27. Pacific Green Company (PGC) provides landscaping services to individual and corporate
customers in southern California. Heather F originally founded PGC as a lawn mowing service
while she attended graduate school. It became so successful that she delayed her teaching
career to concentrate on building the company. This case describes PGC's processes for leasing
trucks, maintaining trucks, and purchasing plants.

Inventories. PGC maintains an inventory of trucks of all sizes to support various landscaping
requirements (the acquisition of trucks are outside the scope of this case). PGC tracks the trucks
by vehicle identification numbers (VINs) and keeps meticulous records on each truck. For
example, they track the mileage for each truck on each landscaping job. Additionally, they track
the maintenance history for each truck. Each type of truck has a different use and hauling
capacity, but each truck in a particular truck type has the same use and hauling capacity.

PGC also maintains an extensive inventory of plants, ranging from colorful flowers to large
trees, so they can address almost any landscaping requirement on short notice. Since the
common name of many plants vary by region, PGC tracks its plant inventory by scientific names
(i.e., the Latin names). To manage the plant inventory and ensure that the best plants are
applied to job conditions, Heather categorizes all plants by plant type.

Truck Leases. PGC leases all its trucks from local dealers. PGC purchasing agents negotiate the
leases. Each lease involves only one truck due to the state registration requirements. The
dealers require a down payment at the time a lease is signed, and then PGC makes payments
monthly over the life of the lease. Although PGC usually turns in the trucks at the end of the
lease, occasionally, PGC will sign a new lease for an existing truck when that truck provides
unusual capability or has relatively low mileage.

Truck Maintenance. PGC contracts for truck maintenance with local truck repair shops. A
purchasing agent will negotiate a truck maintenance contract for each type of truck with a truck
repair shop that specializes in those types of trucks. Then, PGC takes its trucks to the contracted
shops when maintenance is required. A PGC purchasing agent approves each maintenance
invoice after carefully checking it against the contract terms and assigns a purchase number to
track the purchase of maintenance. A PGC cashier pays the truck maintenance vendors monthly
for all the maintenance invoices received during the month.

Plant purchases. PGC buys its plants in bulk to keep its plant inventory well stocked. Because
PGC has an excellent relationship with its plant vendors, it places informal orders by phone.
When the plants are delivered and accepted, PGC assigns a purchase number to each receipt.
PGC cashiers pay for plant purchases within 30 days of the delivery. PGC cashiers occasionally
combine payments if there are multiple deliveries from the same vendor within a short period

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 of time.

Employees. PGC keeps all employee information together (your model should show one
Employee class). They track each employee's qualifications according to category: purchasing
agent, cashier, landscaping laborer, truck driver, supervisor, etc. An employee is considered
qualified when he or she reaches the number of training hours required for that category.
However, each employee can hold qualifications for several categories, for example an
employee qualified as a purchasing agent could also be qualified as a truck driver.

Vendors. PGC keeps all vendor information together (your model should show one Vendor
class). However, they classify the vendors by type: truck dealer, truck repair shop, plant vendor,
etc.

Miscellaneous. You may assume that all agent, resource, and type image information is entered
into the database before any process activity takes place.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support PGC's processes using all the attributes. Name each table and clearly
identify primary keys with PK and foreign keys with FK. List your tables in the following order:
RESOURCES, EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the following list of
attributes (remember that there should be no classes without attributes).

Attributes:

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McGraw-Hill Education.
 Diagram:

6-49
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McGraw-Hill Education.
 Table listing:

Resources
Cash = cash account # (PK), cash account balance
Trucks = truck VIN (PK), truck make, truck acquired year, truck mileage to date, truck type (FK)
Plants = plant scientific name (PK), plant common name, quantity on hand, plant category
name (FK)

Events
Truck maintenance contracts = truck maintenance contract # (PK), truck maintenance contract
start date, truck maintenance contract end date, vendor # (FK), employee # (FK), truck type (FK)
Truck maintenance = truck maintenance purchase # (PK), truck maintenance vendor's invoice #,
maintenance date, maintenance amount, vendor # (FK), employee # (FK), truck VIN (FK), check
# (FK)
Truck leases = truck lease # (PK), truck lease start date, truck lease end date, truck lease down
payment amount, truck lease monthly payment amount, vendor # (FK), employee # (FK), truck
VIN (FK)
Plant purchases = plant purchase # (PK), plant purchase date, check # (FK), employee # (FK),
vendor # (FK)
Cash disbursements = check # (PK), check date, check amount, cash account # (FK), employee
# (FK), vendor # (FK), truck lease # (FK)

Agents
Employee = employee # (PK), employee name, employee hire date
Vendor = vendor # (PK), vendor name, vendor account payable amount

Type Images
Plant category = plant category name (PK), expected maximum size of plants in this category,
light required for plants in this category, average cost of plants in this category
Truck type = truck type (PK), truck type use, truck type hauling capacity, average daily cost to
use trucks of this type
Employee type = employee type (PK), number of training hours to qualify, number of
employees qualified
Vendor type = vendor type (PK), vendor type description, count of vendors of this type

Linking tables
Plant purchases - plants = plant purchase # + plant scientific name (PK), quantity received, price
Employee - employee type = employee # + employee type (PK), date this employee qualified

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 for this type

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

6-51
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McGraw-Hill Education.
28. Pacific Green Company (PGC) provides landscaping services to individual and corporate
customers in southern California. Heather F originally founded PGC as a lawn mowing service
while she attended graduate school. It became so successful that she delayed her teaching
career to concentrate on building the company. This case describes PGC's processes for
maintaining trucks.

PGC contracts for truck maintenance with local truck repair shops. A purchasing agent will
negotiate a truck maintenance contract for each type of truck with a truck repair shop that
specializes in those types of trucks. If the purchasing agent cannot negotiate satisfactory
contract terms, the contracting process terminates. The process then starts over until contracts
are in place.

When trucks are due for maintenance or repair, a PGC truck driver takes its trucks to the
contracted shops. A PGC purchasing agent approves each maintenance invoice after carefully
checking it against the contract terms and to confirm that the required maintenance or repairs
are made. If the maintenance complies and the repairs were satisfactorily performed, PGC
assigns a purchase number to track the purchase of maintenance. A PGC cashier then pays the
truck maintenance vendors. If the invoice does not comply with the terms of the contract, the
PGC purchasing agent returns the invoice for correction. If the repairs are not satisfactory, the
purchasing agent takes the truck back so the shop can perform the repairs or maintenance
satisfactorily.

REQUIRED: Using the description above, correct the following BPMN activity diagram to
accurately depict the PGC truck contracting and maintenance process.

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McGraw-Hill Education.
 (it is possible that other solutions may also be correct)

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-02 Develop an activity model of the purchase and payment process using BPMN.
Source: Original
Topic: Purchases and Payments

6-53
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McGraw-Hill Education.
29. Integrated Case combining both sales and purchases processes.

Background: When Arnold retired from politics after the state budget crises of 2008, 2009, and
2010 he found that the downturn in the overall economy had affected his retirement plans. Plus,
he needs money for his divorce from Maria while his new movies are still in production. So, he
decided to open a unique health spa that will cater to movie stars and other wealthy clients.
Taking advantage of the historically low mortgage rates, he acquired an impressive estate in
Rancho Palos Verdes overlooking the Pacific Ocean and converted it into an expensive spa.
After some extensive market research and a number of personal visits to other spas (it was a
tough job but someone had to do it), he opened Arnold's California Spa offering a variety of
activities (such as golf, Pilates, yoga, massage, mud baths, aerobics, weight lifting, dodge ball,
etc.) so clients have the option of either 1) getting physically fit with the latest in exercise
technology or 2) just relaxing in luxury. His spa quickly became extremely successful and he
plans to expand to other cities. Arnold realizes that his business needs an accounting system,
and he has asked you to analyze his requirements and help him design a system that can grow
along with his business.

Arnold's business requirements: During your interview with Arnold, he describes his business
requirements for his purchasing and sales processes as follows:

Spa Packages. We offer our clients a selection of spa packages that changes according to the
time of year and customer demand. For example, we might offer the Spring Getaway Package,
the Relaxing Escape from the Economy Package, the Pure Indulgence Package, the Sports
Package, and the Steroid-Free Bodybuilding Package. Each package includes several activities,
such as weight lifting, aerobics, Pilates, mountain biking, yoga, tennis, golf, various skin care
therapies, hydrotherapies, body therapies, and massage.

The price of each spa package depends on the specific activities included in the package. For
example, the Steroid-Free Bodybuilding Package includes weight lifting, yoga, dodge ball, and
scientifically designed ice baths to restore the muscles. Each activity could appear multiple
times in each spa package, for example we could include two rounds of golf in one package. Of
course, each activity is included in multiple spa packages.

We set the price of each spa package by first determining what we want to charge for each of
the activities depending on the time of year, the products used in the activity, and expected
popularity. We then add up the charges for each activity to form the overall price for the spa
package; however, the clients only see one single price for the whole package. To monitor
profitability, we track year-to-date sales information for each activity included in any spa
package.

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 Sales process (spa visits): Arnold's California Spa emphasizes customer service, of course. Each
client makes reservations in advance, and one reservation could schedule several future spa
visits (each individual spa visit involves only one spa package, but the client could select a
different spa package for each visit). When the client arrives for a spa visit, we assign one of our
employees to be responsible for the client and direct all the client's activities for that visit. This
responsibility only applies to the specific visit. Other employees will also be involved in the spa
visit depending upon the activities included in the specific spa package that the client selected.
For example, the visit director may conduct a golf lesson for the client while an assisting
employee may provide a therapeutic massage for the client's guest (to maintain appropriate
discretion, we don't track clients' guests). We expect our employees to provide the highest
quality customer service and we plan to hold them accountable. Since all of our employees will
be able to be visit directors, we want to track who directs and who assists with each specific visit
as well as the number of hours they spend with the client.

Since most clients love their experience and want to return, we offer them an opportunity to
become members of Arnold's Entourage. Entourage members earn membership rewards based
on the number of visits and the amounts spent. Entourage members also get priority
reservations and can pay for visits over time with regular monthly payments, where the number
of payments depends on their membership group: bronze, silver, or gold. Since an Entourage
member could visit several times while also making payments for prior visits, each client
payment could apply to several spa visits. Clients that are not Entourage members must pay for
each spa visit in full at the time of the visit. To plan for future marketing, we track year-to-date
spending for each combination of Entourage Group and activity, so we can see which activities
appeal to which membership group.

Product Inventory and purchasing. We maintain an inventory of productssuch as sports gear,

towels, robes, shampoos, golf balls, body-wrap material, seaweed, massage oils, bodybuilding
supplements, raw fruit juices, and vitamins that we use in the spa visits. We record the
quantity and cost of each product used in a spa visit as well as the total costs for each visit to
determine profitability. For planning, we also track which products are used in each activity,
although many products are used in multiple activities. We estimate the quantity and cost of
each product used in each activity, which then allows us to estimate the overall cost of each
activity, so we can decide what to charge for the activity when it is offered in any spa package.

We buy our products from a number of vendors. We've already worked out agreements for
them to deliver products on a regular basis. We record purchases by purchase number when
they deliver the products. All our vendors require payment in full within 30 days after we

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McGraw-Hill Education.
 receive the products, but depending on timing, we may issue one check to pay for multiple
purchases from a vendor.

Other information. We record information about activities before they are offered in any spa
package, and we add new spa packages before any client purchases them. We have a payroll
service that handles all our payroll needs, so you don't need to consider payroll in your analysis.
We assign each employee an employee number and a job title, like "master masseuse", "yoga
instructor supervisor", "hair styling specialist" and "the guy who will pump you up." However,
every employee can perform several different jobs at the spa, so we keep all the employee
information in one set of records. We only use the title to impress our clients and not for any
real business purpose (we don't categorize employees by employee types). We record
information about all agents, resources, and type images before they are linked to other
classes.

REQUIRED: 1) use the information above and the list of attributes below to draw a UML class
diagram showing the classes, associations, and multiplicities, 2) prepare a listing of the tables
necessary to support Arnold's California Spa processes using all the attributes. Name each table
and clearly identify primary keys with PK and foreign keys with FK. List your tables in the
following order: RESOURCES, EVENTS, AGENTS, TYPE IMAGES, and LINKING. Use only the
following list of attributes (remember that there should be no classes without attributes).

Diagram:

6-56
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McGraw-Hill Education.
 Table listing:

Resources
Products = Product # (PK), Product description, standard cost, quantity on hand
Cash = Cash account # (PK), Cash account balance

Events
Purchase = Purchase # (PK), Purchase date, Employee # (FK), Vendor # (FK), Check # (FK)
Cash Receipt = Cash receipt # (PK), Cash receipt amount, Cash receipt date, Cash account #
(FK), Employee # (FK), Client # (FK)
Cash Disbursement = Check # (PK), Check amount, Check date, Employee # (FK), Vendor #
(FK), Cash account # (FK)
Spa Visit = Spa visit # (PK), Spa visit date, Total labor hours for this spa visit, client contact hours
for this employee in this spa visit, Employee # (director) (FK), Client # (FK), Spa Package Name
(FK), Spa Reservation #
Spa Reservation = Spa Reservation # (PK), Spa Reservation Date, Client # (FK), Employee # (FK)

Agents
Clients = Client # (PK), Client name, Year-to-Date (YTD) Sales $ For This Client, Entourage
Group (FK)
Employees = Employee # (PK), Employee name, Employee title
Vendor = Vendor # (PK), Vendor name

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 Type Images
Activities = Activity name (PK), Activity description, Planned cost of this activity, Year-to-date
(YTD) sales $ for this activity
Spa package = Spa package name (PK), Spa package begin offering date, Spa package end
offering date, Spa package price
Entourage Group = Entourage Group (PK), Months to pay for members in this Entourage level,
YTD Sales $ for clients in this Entourage Group

Linking Tables
Spa Package - Activities = Spa Package Name + Activity Name (PK), Price of this activity in this
spa package
Product - Vendor = Product # + Vendor # (PK), YTD purchases for this product with this vendor
Spa Visit - Employee = Spa Visit # + Employee # (PK), client contact hours for this employee in
this spa visit
Product - Spa Visit = Product # + Spa Visit # (PK), Cost of this product used in this spa visit,
Quantity of this product used in this spa visit
Purchase - Product = Purchase #, Product #, Quantity of this product received on this purchase,
Cost of this product received on this purchase
Product - Activity = Product # + Activity Name (PK), Quantity of this product planned for use in
this activity
Entourage Group - Activity = Entourage Group + Activity Name (PK), YTD Sales $ for this
Entourage Group and activity
Spa Reservation - Spa Package = Spa Reservation # + Spa Package Name (PK)
Spa Visit - Cash Receipt = Visit # + Cash Receipt # (PK), Amount of this cash receipt applied to
this spa visit

AACSB: Analytic
AICPA BB: Leveraging Technology
AICPA FN: Leveraging Technology
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-05 Develop structure models for the purchase and payment process using UML class diagrams.
Source: Original
Topic: Purchases and Payments

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McGraw-Hill Education.