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SOLUTIONS
UNIVERSITY AT ALBANY
Rockefeller College of Public Affairs and Policy
PAD-501: Financial Management
Final Examination
Fall – 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 I: Financial Statement Analysis (50 points)
Questions 1 to 19 refer to the audited 2006 financial statements of WAMC – a
Capital region public radio station.
1. 1 point. Did the auditors issue a qualified or an unqualified opinion of the
WAMC’s financial position? What is the source of the information?
2. 2 points. How much does WAMC make or lose on its commercial rental-property
activities? Support your answer? Where did you find the information?
3. 3 point. Has WAMC’s member pledges receivable changed materially as a
percent of member funding between fiscal years 2005 and 2006? Support your
answer? Where did you find the information?
4. 1 point. What method of depreciation does WAMC use? What were its
depreciation expenses for fiscal year 2005? Where did you find the information?
5. 2 points. What were WAMC’s interest expenses and principal repayments on its
$2,000,000 mortgage note for fiscal year 2006? Where did you find the
information? Support your answer with the appropriate numbers from the
statements.
6. 4 points. How much did WAMC’s debt to equity ratio increase or decrease
between fiscal years 2005 and 2006? Where did you find the information?
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7. 3 points. What was WAMC’s times-interest-earned ratio for fiscal years 2006 and
2005. Is the trend favorable or unfavorable? Where did you find the information?
Support your answer.
8. 4 points. What was WAMC’s debt-coverage ratio for fiscal year 2006? Are
required debt payments placing upward or downward pressure on this ratio? How
do you know? Where did you find the information?
9. 2 points. Did WAMC’s current ratio increase or decrease between fiscal years
2005 and 2006? Support your answer with numbers from the financial statements.
Where did you find the information?
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10. 2 points. How much did WAMC’s “First Amendment Fund” balance increase or
decrease between June 30 2005 and June 30, 2006? Where did you find the
information? Are these funds unrestricted, temporarily or permanently restricted
for accounting purposes? Why? Support your answers with the appropriate
numbers from the statements.
11. 3 points. Did WAMC’s operating margin increase or decrease between 2005 and
2006? Support your answer with numbers from the financial statements. Where
did you find the information?
12. 3 points. What were the two largest contributors to the change in WAMC’s total
revenue and other support increase between fiscal years 2005 and 2006? Where
did you find that information? Support your answer with the appropriate numbers
from the statements.
Member dues and fund drives = 305,329
13. 4 points. What were WAMC’s fundraising ratios for fiscal years 2005 and 2005?
Is the trend favorable? Explain your answer in 25 words or less. 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?
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14. 2 points. What was WAMC’s program expense ratio for fiscal year 2006? Where
did you find the information to answer the question? Support your answer with
the appropriate numbers from the statements.
15. 3 points. What was WAMC’s largest functional expense for fiscal year 2006? Can
you tell that expense increased or decreased between 2005 and 2006. Is that issue
addressed in the notes? Where did you find the information. Support your answer
with the appropriate numbers from the statements.
16. 4 points. Did WAMC’s cash flows from operations increase or decrease between
fiscal years 2005 and 2006? What was the largest source of operating cash flow
for fiscal year 2006? Where did you find the information? Support your answer
with the appropriate numbers from the statements.
17. 2 points. How much did WAMC invest in plant, property and equipment in fiscal
years 2005 and 2006? Where did you find the information?
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and 2006? Can you tell from the statements of the notes whether performance
activities were profitable? Where did you find the information? Support your
answer with the appropriate numbers from the statements.
its assets? What drove the differences in growth? Where did you find the
information?
Asset growth – (2006) 7,945,036 – (2005) 5,089,583 / (2005) 5,089,583
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 the $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?
c. Why are the numbers different?
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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, in-
arrears, payments of $67,933.98.
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?
4. 2 point. If a nonprofit organization borrows $1,000,000, its net assets would
a) increase
b) decrease
c) stay the same
d) can not tell from the information given
5. 2 point. If Cobleskill pays $50,000 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)
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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 text books 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 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
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$2,000 in cash for the repairs. Record the transaction from the perspective of both
the Police and the Garage.
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Part III: Creating Financial Statements (25 points)
Fleetwood Children’s Services (FCS) began operations on June 1st 2006, the first day of
its fiscal year, with the assets, liability and net asset balances shown below.
a. Using the transactions worksheet on the next page, record the beginning balances
and transactions 1 through 8 below. Be sure to identify the accounts impacted by
each transaction.
b. 4 points. Prepare a Balance Sheet for FCS as of May 31, 2007, the last day of
FCS’s fiscal year, along with a comparison balance sheet for the prior year.
c. 4 points. Prepare an Activity Statement for FCS for the fiscal year ending May 31,
2007.
d. 5 points. Prepare a Cash Flow Statement for FCS for the fiscal year ending May
31, 2007.
1) 2 points. On June 1 2006, FCS borrowed $100,000 on an unsecured note from Local
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1. Borrow $100,000 $100,000 $100,000 $0
1. Interest Expense on $100,000 ($8,000) ($8,000) interest expense $0
2. Pledge revenue $200,000 $300,000 $500,000 $0
2. Uncollectible Pledges ($45,000) ($45,000) Bad debt expense $0
3. Uncollectible Pledge Write-off ($10,000) $10,000 $0
4. Wages expenses $420,000 ($420,000) wage expense $0
4. Wages paid ($380,000) ($380,000) $0
5. Supplies purchases ($15,000) $15,000 $0
5. Supplies used ($3,000) ($3,000) inventory expense $0
6. Pledges collected $250,000 ($250,000) $0
7. Equipment purchased ($210,000) $210,000 $0
7. Equipment used (depreciation) ($17,500) ($17,500) depreciation $0
8. Debt repayment ($25,000) ($25,000) $0
Total Transactions ($88,000) $40,000 ($35,000) $12,000 $192,500 $40,000 $75,000 $500,000 ($493,500) $0
Ending balance $12,000 $75,000 ($60,000) $12,000 $192,500 $40,000 $75,000 $500,000 ($493,500)
