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PROBLEMS 19

owners immediately upon receiving them from the tenant(s). All tenants are required to make rental
payments to Worifree using electronic funds transfers.
Revenue Cycle: Worifree's revenue is from one source only-property owners. A revenue transac-
tion is recorded strictly for services performed by Worifree's employees or its contractors on one
property. Contractor services include those for maintenance and advertising on clients' properties.
The contractors invoice Worifree for services performed on a particular occasion that may include
one or more services. Once the contractors are paid, Worifree, in turn, invoices the property owner
with a service invoice for the expenditures. Worifree invoices its clients for the same amount as the
contractors invoice Worifree.
Included in Worifree's service invoice is a monthly property management fee and charges for
other services performed by its employees, such as new rental lease arrangements and maintenance
expenditures. An invoice involves only one employee, but an employee can handle more than one
invoice. Service invoices are prepared for each client every month and the client is required to pay
in full for each bill. On rare occasions, some clients may not pay on time and Worifree accepts late
payments with financial charges. Worifree maintains only current clients' information in its database.
The cash collections are done through electronic funds transfer; thus, no employee is involved in the
cash collection process.
Expenditure Cycle: The expenditure cycle of Worifree is not complex. There are two kinds of expen-
ditures: (1) services provided by contractors and (2) supplies/fixed assets purchased from vendors.
Maintenance and advertising services are provided by a specified set of vendors for quality and cost
control. Since Worifree always gets services from contractors with whom they have had transactions
before, there could be a delay to get the desired service when certain contractors are busy. Some con-
tractors provide more than one kind of service for Worifree. When each service is completed and
Worifree is billed, Worifree always pays the contractor electronically in full.
When making purchases, Worifree uses a specified set of qualified vendors. Some vendors
in the vendor list are alternate vendors. Worifree orders from the alternate vendors only if the often-
used vendor does not have a specific item in stock. All purchases are made by purchasing agents.
Each purchase involves only one purchasing agent and one vendor. Vendors may provide Worifree
with one or more than one type of product on more than one occasion. Payments for most purchas-
es are made in full. Some vendors bill Worifree monthly, particularly for office supplies. However,
when purchasing expensive office equipment or large furniture, Worifree makes installment pay-
ments. Since Worifree has an excellent credit history, some vendors do not require a down payment
for installment purchases.
Required:
1. Construct an REA diagram to depict Worifree's revenue cycle.
2. Construct an REA diagram to depict Worifree's expenditure cycle.

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