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SOLUTIONS
UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-646: Financial Management
Final Examination
Spring – 2007
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.
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Part II (30 points): The following questions do not relate to the ARC financial
statements.
1. 1 point. What is the fundamental accounting equation for a balance sheet?
2. 2 points. Choose your answer to the following questions from the list of financial
statements to answer the following questions. (Each answer is worth 1 point)
a) Balance sheet
b) Activity Statement
c) Cash Flow Statement
3. 2 points. If the town of Bethlehem borrowed $10,000,000 by issuing a 20-year
bond, how would they record that financial event?
4. 1 point. If an organization has $2,000 less of revenue and support than expenses,
its net assets would:
5. 1 point. In nonprofit organizations, all expenses are reported as changes in:
6. 4 points. On January 1st the first day of the fiscal year, Major Metropolitan
Museum (MMM) received a $500 check from a patron to purchase a five-year
membership to the museum. Under the accrual basis of accounting:
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a. How much of those funds should be recognized as revenue on December
31st the last day of the fiscal year? Show the appropriate transaction.
b. How should MMM have recorded the transaction when the $500 check
was received on January 1st?
7. 2 points. Choose from the options below to fill in the blanks. A nonprofit
organization would recognize an expense when a resource is
a) paid for
b) delivered
c) encumbered
d) used
e) budgeted
8. 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.
9. 1 point. Paper clips have at least three-year useful lives. However, organizations
do not recognize them as long-term fixed assets. Rather, they recognize an
expense for them in the year they are first used. What accounting principal does
this illustrate?
10. 8 points. The nonprofit Center for Educational Development (CED) began the
year with a pledges gross receivable balance of $630,000 and total allowances for
uncollectible pledges of $100,000. During the year, CED received cash donations
of $200,000 and pledges of $300,000. Historically, 15% of CED’s pledges have
not been collectible.
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a. 1 point. Record the cash contributions.
b. 2 points. Record the pledges.
c. 1 point. CED’s policy is to write off all pledges that have not been
collected within two years. As of today, $55,000 in pledges receivable are
more than two years old. Record the write-off of those pledges
d. 2 points. What were CED’s net pledges receivable before and after the
write-off?
e. 2 points. What was the impact of these transactions on CED’s net assets?
11. 6 points. CED purchases text books for its pre-school programs. On January 1,
they had 200 books with a cost of $5 each on hand. During the year, they made
additional purchases as follows: (i) 300 books at $6 each on January 20th, (ii) 400
books at $5 each on July 1st, and (iii) 500 books at $7 each on December 1st. CED
distributed books to its pre-school centers on July 1st (400 books) and November
11th (500 books). Calculate CED book expense and the value of its remaining
inventory as of December 31st, the last day of its fiscal year.
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a. 3 points. Using FIFO
Part III: Creating Financial Statements (30 points)
The Children’s Medical Center (CMC) began operations on January 1st 2006 with
$10,000 in cash and unrestricted net assets of $10,000.
a. Using the transactions worksheet on the next page, record transactions 1 through 8
below. Be sure to identify the accounts impacted by each transaction.
b. Prepare a balance sheet for CMC as of December 31, 2006 with a comparison to
the prior year.
c. Prepare an Activity Statement for CMC as of December 31, 2006
d. Prepare a Cash Flow Statement for CMC as of December 31, 2006
During the year the following transactions occurred:
1) CMC received an unrestricted $10,000 cash donation from a benefactor on January
15, 2003.
2) CMC bought Equipment for $8,000 in cash. It has a useful life of five years, no
residual value. CMC uses straight-line depreciation.
3) Supplies (inventory) are purchased for $5,000. The supplier sent CMC a bill.
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4) Staff earned $40,000 in wages. Of that total, $36,000 was paid.
5) $3,000 of supplies were used.
6) Patient bills in the amount of $50,000 are sent to patients. CMC expects to collect
100% of the amount billed.
7) $30,000 of cash is received from patients to whom bills were sent in Transaction 6.
8) CMC pays its inventory supplier $3,000.
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Assets
Liabilities
Net Assets
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