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SOLUTIONS
UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-501: Financial Management
Final Examination
Fall – 2010
Name: ________________________________________________
As a courtesy to your classmates, please turn off cell phones.
INSTRUCTIONS
1. PRINT your name clearly on every page of this exam and put your initials at the
2. You may use a calculator and one page of notes. All other books and materials
3. You have the full three-hour period to complete the exam. That should be more than
4. If you get stuck on any one question, move on, and come back to it later if you
5. International students may refer to a dictionary.
6. If something is not clear, ask for clarification.
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Part I: Financial Statement Analysis (50 points)
Questions 1 to 12 refer to the audited 2010 financial statements of WAMC – a
capital region public radio station.
1. 1 point. Did the auditors issue a qualified, unqualified or adverse opinion of
WAMC’s financial position? What is the source of the information?
2. 2 point. Does WAMC comply with Generally Accepted Accounting
Principles in its treatment of bad debts? Be specific. What is the source of the
information for your answer?
3. 4 points. Was WAMC a net buyer or seller of investments (other than
property and equipment) in fiscal years 2009 and 2010? Support your answer
with the appropriate numbers from the statements? Where did you find the
information?
4. 6 points. What were WAMC Current ratios for fiscal years 2009 and 2010?
How do they compare to the rule of thumb for current ratios? Is the trend
favorable or unfavorable? Where did you find the information?
Current ratio = current assets / current liabilities
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5. 8 points. What were WAMC’s total debt-to-net-assets ratios for fiscal years
2009 and 2010? Be sure to exclude all non-debt liabilities from your
calculations. How do they compare to the rule of thumb for debt-to-net-asset
ratios? Is the trend favorable or unfavorable? Where did you find the
information?
Debt to Net Assets = total debt / total net assets
6. 5 points. What were WAMC’s times-interest-earned ratios for fiscal years
2009 and 2010? How do they compare to the rule of thumb for times-
interest-earned ratios? Is the trend favorable or unfavorable? Where did you
find the information?
Times Interest Earned = (change in net assets + interest expense)
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interest expense
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7. 6 points. How much did WAMC’s total change in net assets increase or
decrease between fiscal years 2009 and 2010? What were their operating
margins in each of those fiscal years? Support you answer with all
appropriate numbers. Where did you find the information?
Operating margin = total increase in unrestricted net assets
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Total unrestricted revenue and support
8. 5 points. What was the largest single source of revenue and support for
WAMC during fiscal years 2009 and 2010? What percent of WAMC’s total
revenue and support did that source represent in each fiscal year? What was
the percentage increase or decrease in that source between the two fiscal
years? Where did you find the information?
9. 5 points. How much did “other support and revenue” increase between fiscal
years 2009 and 2010? What was the single major contributor to that change?
Support you answer with all appropriate numbers. Where did you find the
information?
SOLUTION
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10. 3 point. What was WAMC’s program expense ratio for fiscal year 2010?
Support you answer with all appropriate numbers. Where did you find the
information?
Program expense ratio = program expenses / total expenses
11. 2 points. What method of depreciation does WAMC use? What were its
depreciation expenses for fiscal years 2009 and 2010? Where did you find
the information?
12. 3 points. How much did WAMC’s “First Amendment Fund” balance
increase or decrease between June 30 2009 and June 30, 2010? For
accounting purposes, are these funds unrestricted, temporarily or
permanently restricted? Support your answers with the appropriate numbers
from the statements. Where did you find the information?
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Part II (25 points): The following questions do not relate to the WAMC financial
statements.
1. 1 point. What is the fundamental accounting equation for a balance sheet?
2. 3 points. The Town of Cobleskill sent $3,000,000 of real-estate tax bills to its
residents on the first day of its fiscal year. It expects to collect $2,800,000 of those
bills within the fiscal year and 60% of the remainder within 60 days after the end
of the fiscal year. The town expects to collect the remainder by the end of the next
fiscal year. All revenue is recorded in the Town’s General Fund.
a. How would that revenue be recorded on the Cobleskill’s government-wide
financial statements?
b. How would it be recorded in Cobleskill’s General Fund?
3. 3 points. On the first day of its fiscal year, the Albany Symphony, a nonprofit
organization, borrowed $500,000 on a ten-year mortgage to finance repairs to its
rehearsal space. The loan carried an annual interest rate of 6% with annual
payments of $67,933.98 made on the last day of each year.
a. What would the Symphony’s interest expense for the year be?
b. How much of the loan would be recorded as a current liability on the day
the loan was funded?
c. How much of the loan would be recorded as a long-term liability on the
day the loan was funded?
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a) increase
b) decrease
c) stay the same
d) can not tell from the information given
5. 2 point. If Cobleskill pays $50,000 in interest and repays $250,000 of principal it
owes thorough its debt service fund, how would it record the transaction?
6. 2 points. County government would recognize revenue when .,. (choose from the
selections below)
7. 2 points. Choose from: (i) cash accounting, (ii) accrual accounting and (iii)
modified accrual accounting to identify the method of accounting used for the
following government financial statements.
8. 6 points. Food for Folks (FFF), a nonprofit organization, purchased disposable
plates for its pre-school programs. On January 1, they had 400 cases of disposable
plates with a cost of $5 each on hand. During the year, they made additional
purchases as follows: 500 cases at $6 each on August 17th and 300 cases at $8
each on December 1st. FFF used the plates as follows: February 1st (200 crates),
April 11th (200 crates) and September 16th (400 crates). Calculate FFF’s plate
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expense and the value of its remaining inventory as of December 31st, the last day
of its fiscal year.
a. 3 points. Using FIFO
b. 3 points Using LIFO
9. 4 points. The Schenectady Police Department contracted with the City’s Repair
Garage (an internal service fund) for repairs on three of its cruisers. The total cost
for the repairs was $3,500. When the repairs were completed, the City Garage
billed the Police department for the work. The police department sent the Garage
$2,000 in cash for the repairs. Record the transaction from the perspective of both
the Police and the Garage.
Part III: Creating Financial Statements (25 points)
Fleetwood Children’s Services (FCS) began operations on June 1st 2009, the first day of
its fiscal year, with the assets, liability and net asset balances shown below.
Record the eight transactions below. Be sure to identify the accounts impacted by each
transaction. Then, record the beginning balances shown below on the worksheet provided
with the exam and transcribe transactions 1 through 8 to the worksheet. Using that data:
a. 4 points. Prepare a Balance Sheet for FCS as of May 31, 2010, the last day of
FCS’s fiscal year, along with a comparison balance sheet for the prior year.
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b. 4 points. Prepare an Activity Statement for FCS for the fiscal year ending
May 31, 2010.
c. 5 points. Prepare a Cash Flow Statement for FCS for the fiscal year ending
May 31, 2010.
During the year the following transactions occurred:
1) 2 points. On June 1 2009, FCS borrowed $100,000 on an unsecured note from Local
Bank, NA. Interest on the loan will be due and payable on May 31, 2010. The
interest rate on the loan is 8% per annum.
2) 2 points. On July 1, 2009, FCS ran a fund-raising campaign and raised $200,000 in
cash and $300,000 in pledges. Historically, FCS has been able to collect 85% of the
pledges made to the organization.
3) 1 points. On August 31, 2009 FCS stopped trying to collect pledges that had been
made prior to fiscal year 2010 and wrote off $10,000 in uncollectible pledges.
4) 1 point. During the fiscal year, FCS’s Staff earned $420,000 in wages. Of that total,
$380,000 was paid.
5) 2 points. During the year, FCS bought $15,000 worth of supplies and paid for them in
cash. $3,000 worth of supplies was used.
6) 1 point. On January 15, 2010, FCS collected $250,000 of the pledges made in July of
this year.
7) 2 points. On March 1, 2010, FCS bought office equipment for $210,000 and paid
cash. The equipment has a three-year useful life and no residual value. FCS uses
straight-line depreciation.
8) 1 point. On May 31, 2010, FCS repaid $25,000 of the amount borrowed from the
bank on June 1, 2006. Transactions
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Balance Sheet
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Balance Sheet FY 2007 FY 2006
Assets
Cash 12,000$ 100,000$
Net P/R 15,000$ 10,000$
Inventory 12,000$
Total ST assets 39,000$ 110,000$
Net PP&E 192,500$ –$
Total LT Assets 192,500$ –$
Total Assets 231,500$ 110,000$
Liabilities
W/P 40,000$
Total ST Liabilities 40,000$ –$
N/P 75,000$
Total LT Liabilities 75,000$ –$
Total liabilities 115,000$
UNA 116,500$ 110,000$
Total NA
Total Liabilities & NA 231,500$ 110,000$
Activity Statement
Activity Statement
Pledge evenue 500,000$
Total revenue 500,000$
Expenses
Wage Expense 420,000$
Bad debt expense 45,000$
Inventory expense 3,000$
Interest expense 8,000$
Depreciation 17,500$
Total Expenses 493,500$
Surplus/(deficit) 6,500$
NA at beginning of period 110,000$
NA at end of period 116,500$
Cash Flow Statement
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