New York University
Robert F. Wagner Graduate School of Public Service
P11.1021: Financial Management
Lecturer Rogers
Final Examination SOLUTIONS
Summer 2007
Name: ________________________________________________
All exams will be returned to the Puck Student Mailroom. Please provide your mailbox number
or, if you are a non-Wagner student, write “non-Wagner”_________________________________
Directions:
1) As a courtesy to your classmates, please turn off electronic devices such as cell phones and
pagers.
5) Show your work! If you get the wrong answer and you don’t show how you set up the problem,
you won’t receive any partial credit.
6) Circle your final answers! Only one answer for each question will be accepted.
7) All calculations and final answers must be written on the exam, no other papers will be
considered when grading.
Good Luck!
Basic Concepts (32 points)
1. (1 point) The net book value is the cumulative amount of depreciation for a fixed asset that
3. (1 point) Earned revenues are recorded when an organization is paid in advance for goods or
4. (1 point) What generally accepted accounting principle requires that all items included in
financial statements be measurable in dollar terms?
5. (2 points) List two types of governmental funds:
6. (4 points) Alhambra Community Development Corporation, a nonprofit organization, has an
eight-year $160,000 note payable with a 7% interest rate. The bank requires annual
repayments from Alhambra CDC of $26,794.94. For the first year’s payment of $26,794.94,
how much represents the repayment of principal and how much represents the payment of
interest?
7. (6 points) The local YWCA began the year with 20 notebooks for its after-school students,
which were purchased last year for the price of 50 cents each. The Y bought an additional
100 notebooks at 60 cents each in March. In April, they used 60 notebooks. By August, the
Y only had 30 notebooks left, so they bought another 100 notebooks at a cost of 75 cents
each. By the last day of the fiscal year, the Y had only 15 notebooks. Assume the Y follows
the periodic method of inventory, and computes inventory costs at the end of the fiscal year.
Have/Bought Used Remaining
20 @ $.50
100 @ $.60
100 @ $.75
220 205 15
a. Show the inventory expense the YWCA would write on its Statement of
b. What would be the value of the inventory that the YWCA would report on its
Balance Sheet at the end of the year if it used FIFO?
8. (5 points) On March 1st Oxford, Ohio received $25,000,000 through the sale of bonds to
build a new hospital.
a. How would the city record this transaction? (Be sure to show the impact of the
transaction on the fundamental accounting equation.)
b. Show how a nonprofit organization would record this transaction? (Be sure to show the
impact of the transaction on the fundamental accounting equation.)
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9. (4 points) On September 1st Oxford, Ohio paid contractors in full for building the new
hospital. How would the city record this transaction?
10. (7 points) City University, a nonprofit college, is required by the Board of Regents to transfer
$500,000 from its General Fund to its Sinking Fund at the end of each year. On December
31st, City University transfers $350,000 in cash. Show how City University would record
this transaction. Make sure you show the impact on both funds and the fundamental
accounting equation.
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Preparation of Financial Statements (38 points)
One World Not Three (OWNT) Relief Fund is an international nonprofit relief agency based in
the United States. OWNT recently celebrated its tenth anniversary and is in the middle of trying
to expand its operations and funding sources. OWNT uses accrual accounting and follows all
US GAAP and FASB accounting rules when reporting its financial situation. During its 2006
fiscal year (July 1, 2005 – June 30, 2006), OWNT recorded the following financial events:
1. Earned $250,000 by providing disaster readiness training programs. Received $235,000
2. Took out a $500,000 bank loan. OWNT is hoping to buy the building next door for
3. Received $200,000 in contribution pledges. $150,000 of which was received in cash.
OWNT expects that 10% of the pledges not immediately collected in cash will not be
4. Received a final payment of $350,000 from a three-year grant made three years ago.
5. Purchased the building next door for $560,000. OWNT expects that its current building
will last another 20 years and that the new building has a life of 35 years. OWNT uses
6. Purchased $175,000 in first aid kit inventory. Paid 80% of the inventory in cash. The
7. OWNT paid its employees $580,000 in wages. Wage expense for the year was $600,000.
8. First aid kits inventory equals $12,000 at the end of the year.
9. Complied with the terms of the bank loan, which require OWNT to repay $28,000 of the
loan at the end of fiscal year 2006 plus pay 7% interest on the outstanding principal
balance carried during the year.
Attached is OWNT Relief Fund’s Statement of Financial Position from fiscal year 2005. Prepare
the following financial statements for One World Not Three Relief Fund’s fiscal year 2006:
balance sheet (13 points), activity statement (10 points), and cash flow statement (15 points).
You should use the transactions worksheet to work through the above transactions; however,
these transactions will not be graded.
ASSETS = LIABILITIES + NET ASSETS
Cash A/R P/R
Allow.
Uncoll.
Pledges PP&E,
net Inventory Accounts
Payable Wages
Payable Notes
Payable Unrestricted Permanently
Restricted
Beginning
Balance $142,000 $3,000 $400,000 ($6,000) $240,000 $28,000 $120,000 $14,000 $0 $373,000 $300,000
1 $235,000 $15,000 $250,000 Training
Revenue
2 $500,000 $500,000
3 $150,000 $50,000 $200,000 Contributions
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Summer 2007 Final Exa
Financial Statements
One World Not Three Relief Fund
Statement of Financial Position
As of June 30, 2006
[1 pt for
correct
header]
Assets Liabilities
Cash $ 34,000 [1] Accounts Payable $ 155,000 [1]
Accounts Receivable 18,000 [1] Wages Payable 34,000 [1]
[1] for assets and net assets listed in order of declining liquidity and liabilities listed in declining order of how soon
they are due.
[1] for total assets = total liabilities + net assets (even if numbers are wrong)
subtract [1] point if Pledges Receivable and PP&E are not labeled with “net”
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Financial Statements
One World Not Three Relief Fund
Statement of Activities
For Year Ending June 30, 2006
[1 pt for
correct
header]
Revenues
Training Programs $ 250,000 [1]
Contributions 200,000 [1]
Total Revenue $ 450,000
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Financial Statements
One World Not Three Relief Fund
Statement of Cash Flows
For Year Ending June 30, 2006
[1 pt for
correct
header]
Cash Flow from Operating Activities
(Decrease) in Net Assets $ (409,000) [1]
Expenses not requiring cash
Depreciation 28,000 [1]
(Increase)/Decrease in Current Assets
Accounts Receivable (15,000) [1]
Pledges Receivable, net 305,000 [1]
Inventory 16,000 [1]
Increase/(Decrease) in Current Liabilities
Accounts Payable 35,000 [1]
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Financial Analysis (30 points)
The remainder of the exam refers to the financial statements for WNYC.
For questions 1 through 4, select the appropriate ratio from the following list:
1. (4 points) a) Which ratio would you use to measure WNYC’s liquidity?
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2. (4 points) a) Which ratio would you use to measure WNYC’s profitability?
3. (4 points) a) Which ratio would you use to measure WNYC’s leverage?
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4. (2 points) WNYC would have to remit a portion of its sales proceeds to the city, if what
event occurred? How do you know and where did you find this information?
5. (2 points) a) Does WNYC take into account time value of money when reporting future
grants and contributions? How do you know and where did you find this information?
b) What GAAP concept is being utilized when an organization uses time value of money
when reporting future grants and contributions?
Conservatism [1]
6. (1 point) Are the interest payments that WNYC must make on its Revenue Bond
annuities in advance or annuities in arrears? How do you know and where did you find
this information?
7. (1 point) What is the range of estimated useful life for WNYC’s fixed assets? How do
you know and where did you find this information?
8. (2 points) a) What were the donated services and support that WNYC received in 2006?
b) What was the total fair value of these donated services and support in 2006?
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9. (10 points) Write a brief essay (no more than 1 page) discussing the general financial
health of WNYC. Start by stating your overall impression and then highlight the
organization’s main strengths and weaknesses. Support your opinions with evidence
from the financial statements.
Overall impression: good/improved financial position [1]
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