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SOLUTIONS
UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-501: Financial Management
Final Examination
Professors Finn & Purtell
Fall – 2009
Name: ________________________________________________
Class Day & Professor ____________________________________________________
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.
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Part I: Financial Statement Analysis (50 points)
Questions 1 to 12 refer to the audited 2008 financial statements of Scenic Hudson
and the Scenic Hudson Land Trust (SH). All of the questions below refer to the
consolidated statements unless otherwise stated. Be sure to support your answers
with numbers from the financial statements where appropriate, show all of the
numbers used in each calculation and identify where on the financial statements or
in the notes you found the data.
1. 2 point. Did the auditors issue a qualified or an unqualified opinion of the SH’s
financial position? What is the source of the information?
2. 5 points. Answer the following questions about SH’s pledges receivable.
a. What percentage of SH’s pledges fiscal year 2008 receivable are
unrestricted? What is the source of the information?
b. What percentage of SH’s fiscal year 2008 pledges receivable are classified
as current assets? Has that amount increased or decreased between 2007
and 2008?
3. 2 point. Did SH realize net gains or losses on land sales in combined fiscal years
2007 and 2008? Where did you find the information?
4. 5 point. Answer the following questions about SH’s investments.
a. Was SH a net purchaser or seller of investments during fiscal years 2007
and 2008. Where did you find the information? (2 points)
b. What percentage of SH’s fiscal year 2008 investments at fair-market value
were in fixed-income securities and fixed-income mutual funds? Where
did you find the information? (2 points)
c. On a percentage basis, what was SH’s net gain or loss on its overall
investment portfolio during fiscal year 2008? Where did you find the
information? (1 point)
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5. 3 points. How much did SH borrow during fiscal year 2008? What is the actual
interest rate on that loan? How did SH account for imputed interest on the loan?
Where did you find the information? Support your answer with the appropriate
numbers from the statements.
6. 4 points. Answer the following question about SH’s special events.
a. How much did SH’s net income from special events increase or decrease
between fiscal years 2007 and 2008? Where did you find the information?
Support your answer with the appropriate numbers from the statements.
b. What were SH’s operating margins for special events in fiscal year 2007
and 2008? Support your answer with the appropriate numbers from the
statements. Where did you find the information?
7. 3 points. Has the value of the Wallace Endowment increased or decreased since
the date of its transfer to SH? Is the Wallace Endowment unrestricted, temporarily
restricted or permanently restricted? Where did you find the information? Support
your answer with numbers from the statements.
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8. 4 points. Answer the following questions about SH’s operating revenue.
a. How much did SH’s total operating revenue increase or decrease between
fiscal year 2007 and fiscal year 2008? Where did you find the
information? Support your answer with numbers from the statements.
b. What was the primary reason for that change? Be specific. Where did you
find the information? Support your answer with numbers from the
statements.
a. Total operating revenue decreased from $27.6 M to $14.1 M
9. 5 points. What were SH’s program-expense ratios for fiscal years 2007 and 2008?
Is the trend favorable or unfavorable? Support your answer with numbers from
the financial statements. Where did you find the information?
10. 7 point. Answer the following questions about SH’s profitability.
a. Did SH’s Operating Margin before non-operating activities improve or
get worse between fiscal years 2007 and 2008? Support your answer with
numbers from the financial statements. Where did you find the
information?
b. Did SH’s net operating margin improve or get worse between fiscal years
2007 and 2008? What was the primary reason for the difference between
the operating margin in part a and the net operating margin? Support your
answer with numbers from the financial statements. Where did you find
the information?
Operating margin before non-operating activities
= net operating activity / gross operating revenue & support
Net operating margin
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= change in net assets / gross operating revenue & support
11. 2 points. Answer the following questions about SH’s operating expenses.
a. What was Scenic Hudson Inc.’s largest 2008 operating expense by natural
category? Support your answer with numbers from the financial
statements. Where did you find the information?
b. Was the same expense the largest operating cost for the Scenic Hudson
Land Trust, Inc.? Support your answer with numbers from the financial
statements. Where did you find the information?
12. 8 points. How much did SH release from its endowment for operating purposes in
fiscal years 2007 and 2008? What portion of these funds came from the Wallace
endowment? What is the board’s spending policy with respect to the
endowments? Where did you find that information? Support your answer with the
appropriate numbers from the statements.
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Part II (50 points): The following questions do not relate to the SH’s financial
statements.
1. 1 point. What is the fundamental accounting equation for a nonprofit
organization?
2. 1 points. How do the rules for Modified Accrual Accounting “modify” the
fundamental accounting equation?
4. 3 points. The Albany YMCA (The Y), a nonprofit organization, issued into a
twenty-year serial bond on January 1, the first day of the fiscal year. The par
value of the bond was $10,000,000, will be repaid at the bond’s maturity date.
The coupon rate on the bond was 6%. The loan calls for interest payments every
six months on June 30 and December 31. As the Y’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?
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5. 4 points. The Y purchased a five-year general liability insurance policy for
$100,000 They paid the insurance company $50,000 in cash and agreed to pay the
remaining $50,000 on the first day of the next fiscal year. How would the Y
record that transaction on its general ledger? Be sure to segregate the short– and
long-term elements of the transaction
7. 2 points. The Town of Bethlehem’s General Fund collects all of the real-estate
taxes for the Town’s entire government. During the 2010 Fiscal year, $28,000,000
worth of tax bills will be sent out. Of those, the town expects to collect
$12,000,000 within 60 days of the start of the fiscal year, $9,000,000 within 180
days after that, $6,000,000 in the following 185 days and the remainder 60 days
after that. How much of the real-estate taxes would be recorded as revenue during
fiscal year 2010?
8. 6 points. During 2008, The Y, a nonprofit organization, bought and used
containers of pool chemicals as shown in the table below. Under LIFO what was
the Y’s pool-chemical expense for the fiscal year and the value of its remaining
inventory on December 31st 2008? The Y uses the Periodic method of inventory
and takes a count of the inventory on 12/31/08.
Units
Bought
PurchaseP
rice
January 1 50 $100
February 15 90 $80
Used Through June 30 120
August 15 90 $90
October 30 120 $80
Used through December 31 160
SOLUTION
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9. 10 points. Record the transactions below for the Y, a nonprofit organization. Be
sure to identify the balance sheet categories and accounts used in each transaction.
a. On January 1, 2008, the Y acquired gym equipment costing $200,000 for
cash. The equipment has an expected life of 10 years with a residual value
of 20%. The Y uses straight-line depreciation.
b. On January 1, 2008, the Y sent membership-renewal notices to all of its
existing members. If all of the members renewed, the Y would receive
$600,000. Historically, 15% of members do not renew and will not pay the
bill. The Y recognizes all membership revenue when members are billed.
c. On April 1, 2008, the Y paid $70,000 for expenses related to its annual
fund-raising drive.
d. On April 1, 2008, the Y conducted its fundraising drive and received
$150,000 in cash donations.
e. On July 12, 2008, the Y purchased $125,000 worth of supplies and paid its
suppliers $175,000.
f. On August 20, 2008, the Y collected $450,000 that was owed to them for
fiscal year 2008 membership renewals.
g. Through December 31st, the Y used $130,000 worth of supplies.
h. Through December 31, 2008, the Y used $320,000 of labor. During the year,
the Y paid $325,000 of then wages due to its workers.
i. On December 31st, the Y paid principal of $60,000 and interest of $60,000
on its long-term debt.
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10. 15 points. Using the beginning balances below and the transactions in problem 9,
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 the Y.
Beginning Balances
Beginning Balance FY 2007
Cash $300,000
A/P $75,000
A/R $10,000
Long-term Debt $1,000,000
W/P $10,000
Unrestricted Net Assets $450,000
PP&E $1,200,000
Inventory $25,000
SOLUTION
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