PAD-501 Initials ________ 1
SOLUTIONS
UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-501: Financial Management
Final Examination
Spring – 2009
Name: ________________________________________________
As a courtesy to your classmates, please turn off cell phones and pagers.
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.
PAD-646 Initials _______ 2
Part I: Financial Statement Analysis (50 points)
Questions 1 to 18 refer to the audited 2007 financial statements of The Saratoga
Performing Arts Center (SPAC). Be sure to support your answers with numbers
from the financial statements where appropriate, show all of the numbers used in
1. 1 point. Did the auditors issue a qualified or an unqualified opinion of the SPAC’s
financial position? What is the source of the information?
2. 4 points. What percentage of SPAC’s performance costs were paid for by ticket
revenue in 2006 and 2007? What is the source of the information?
3. 2 point. Did ticket revenue increase faster or slower than talent costs on a
percentage basis between 2006 and 2007? Where did you find the information?
4. 1 point. Did any of SPAC’s cash and cash equivalent deposits exceed FDIC
limits? Yes. Source: Note A-3. Where did you find the information?
Yes. Source: Note A-3.
5. 2 points. What were SPAC’s advertising costs for 2006 and 2007? Where did you
find the information? Support your answer with the appropriate numbers from the
statements.
6. 2 points. What is the single largest type of investment held by SPAC? What
percentage of fair market value did it represent at the end of 2007? Where did you
find the information? Support your answer with the appropriate numbers from the
PAD-646 Initials _______ 3
7. 3 points. What percentage of SPAC’s Leasehold’s and Equipment were fully
depreciated by the end of 2007? What basis of depreciation does SPAC use?
Where did you find the information? Support your answer.
8. 2 points. Does SPAC report pledges receivable at their nominal value or their
present value? What discount rate do they use? Where did you find the
information?
9. 6 points. What were SPAC’s current ratios for 2006 and 2007? How do those
ratios compare to the rule of thumb? Is the trend favorable or unfavorable?
Support your answer with numbers from the financial statements. Where did you
find the information?
10. 4 point. What is SPAC’s accumulated Employee Benefit obligation as of
December 31, 2007? Was that amount reported on SPAC’s financial statements?
11. 2 points. How much did SPAC’s cash flow from operations increase or decrease
between 2006 and 2007? Support your answer with numbers from the financial
statements. Where did you find the information?
PAD-646 Initials _______ 4
4
12. 2 points. How much did SPAC invest in leaseholds and equipment during 2007?
Where did you find that information? Support your answer with the appropriate
numbers from the statements.
13. 6 points. What is SPAC’s gross operating margin without Museum of Dance
operations for 2007? Support your answer with the appropriate numbers from the
statements. Indicate the funding sources you included in the denominator? Where
did you find the information?
14. 4 points. Were SPAC’s Museum of Dance operations profitable during fiscal
2007? Were they more or less profitable on a percentage basis than non-Museum
operations? Where did you find the information to answer the question? Support
your answer with the appropriate numbers from the statements.
15. 2 points. How much did fundraising benefits raise for the Museum in 2006 and
2007? Where did you find the information? Support your answer with the
appropriate numbers from the statements.
PAD-646 Initials _______ 5
5
16. 3 points. What was the largest source of operating subsidies for SPAC in 2006
and 2007? What was the percentage increase in that subsidy between the two
years? Where did you find the information? Support your answer with the
appropriate numbers from the statements.
17. 2 points. What can SPAC use the Classical Performances portion of its
permanently restricted net assets for? Where did you find the information?
18. 2 points. What was SPAC’s total revenue from all sources for 2007? Where did
you find the information? Support your answer with the appropriate numbers
from the statements.
PAD-646 Initials _______ 6
Part II (50 points): The following questions do not relate to the SPAC’s
financial statements.
1. 1 point. What is the fundamental accounting equation for a nonprofit
organization?
Assets = liabilities + net assets
2. 2 points. Governments record revenues when they are measurable and available.
Briefly describe what it means to say that funds are “available”.
4. 3 points. Save the Kids (STK), a nonprofit organization, entered into a long-term
amortizing loan (a mortgage) on the first day of the fiscal year. The original
amount of the loan was $100,000 and the simple interest rate on the loan is 6%.
The loan calls for annual payments in arrears of $13,586.80. As STK’s finance
director, you want to record the loan on the organizations balance sheet and plan
for its inclusion on the activity statement. What are the short-term and long-term
portions of the loan that will be recorded on the balance sheet as of the first day of
the fiscal year? What is the expected interest expense for the year?
5. 4 points. STK offers supporters five-year memberships in its sponsors club for
$100. John, a long-time supporter, purchased a membership at the beginning of
the year. How would STK record that transaction when the membership was
purchased? What entry would they make to their financial records at the end of
the year?
PAD-646 Initials _______ 7
9. 4 points. The Town of Colonie’s General Fund collects all of the tax revenues for
the Town’s entire government. Out of those funds, the General Fund is required to
make transfers to other parts of the town operations. On April 1st, the General
Fund was required to transfer $500,000 to the Police Department Fund. At the
time the transfer was due, the General Fund only had $450,000 of cash available.
How would the Town record the transaction at the time of the $500,000 transfer?
10. 6 points. During 2008, Teach the Kids (TTK), a nonprofit after-school program,
bought and used boxes of paper as shown in the table below. Under LIFO what
was TTK’s inventory expense and the value of its remaining inventory on
December 31st 2008? TTK uses the periodic method of inventory and take a
physical count of inventory once a year on 12/31.
Date Purchase Use
Amount Price Amount
January 1 20 $15
January 8 5
February 10 5
April 1 10 $17
April 15 10
June 10 5 $19
June 25 5
August 10 10 $17
August 18 10
November 15 5 $20
PAD-646 Initials _______ 8
8
11. 10 points. Record the transactions below for TTK, a nonprofit organization.
a. On January 1, 2008, TTK acquired equipment costing $100,000 for cash.
b. On April 1, 2008, TTK conducted a fundraising drive. It received $50,000 in
cash donations and $100,000 in pledges. Historically, 90% of pledges have
been collected.
c. On July 1, 2008, TTK used food and supplies valued at $74,000 to prepare
and deliver the meals to its clients.
d. On July 12, 2008, TTK paid its suppliers $75,000
e. On July 15, 2008, TTK purchased food and supplies valued at $90,000 and
received bills from its suppliers.
f. On August 20, 2008, TTK collected $40,000 that was owed to them for
meals delivered during fiscal year 2007.
g. Through December 31, 2008, TTK used $80,000 of labor. All wages were
paid in cash.
h. Depreciation for the year totaling $20,000 was recorded on December 31,
2008.
SOLUTIONS
12. 15 points. Using the transactions in problem 11, the information in the list of
assets, liabilities and net assets below and the worksheet provided on the next
page, prepare a comparative balance sheet, an activity statements and a cash-flow
statement for TTK.
PAD-646 Initials _______ 9
9
Assets, Liabilities & Net Assets
Cash 240,000
Unrestricted Net Assets 150,000
Accounts payable 75,000
Accounts Receivable 50,000
Pledges Receivable 10,000
Notes Payable 250,000
Inventory 75,000
PP&E 100,000
PAD-646 Initials _______ 10
10