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Finance

1. Which of the following entities would consider portions of the AICPA Audit and Accounting Guide Health Care Entities category b authoritative guidance?

2. A not-for-profit hospital would present all of the following financial statements except a

3. Which of the following is a true statement regarding a performance indicator?

4. Fees received by a hospital for a “healthy heart” workshop offered to patients should be reported as:

5. Which of the following is an example of an asset limited as to use?

6. Wellness Psychiatric Clinic received a large contribution from the family of a former patient. The contribution came with a request that the funds be used or invested to support any activities that the clinic felt would be best. On this not-for-profit clinic’s statement of cash flows, this contribution would be reported in which section?

7. The Patient Protection and Affordable Care Act, passed in 2010

8. Which of the following would be most useful for evaluating the financial profitability of a not-for-profit health care organization?

9. During its current fiscal year, Evanston General Hospital, a not-for-profit health care organization, had the following revenue-related transactions (amounts summarized for the year).
 

  1. Services provided to inpatients and outpatients amounted to $9,708,000, of which $459,000 was for charity care; $937,000 was paid by uninsured patients; and $8,312,000 was billed to Medicare, Medicaid, and insurance companies.
  2. Donated pharmaceuticals and medical supplies valued at $274,000 were received and utilized as general expenses.
  3. Medicare, Medicaid, and third-party payors (insurance companies) approved and paid $5,374,000 of the $8,312,000 billed by the hospital during the year (see transaction 1).
  4. An unconditional contribution of $5,090,000 was received in cash from a donor to construct a new facility for care of Alzheimer's patients. The full amount is expendable for that purpose. No activity occurred on this project during the current year.
  5. A total of $1,082,000 was received from the following activities/sources: cafeteria and gift shop sales, $800,000; medical seminars, $134,000; unrestricted transfers from the Evanston General Hospital Foundation, $84,000; and fees for medical transcripts, $64,000.
  6. Uncollectible accounts totaling $4,150 were written off. The allowance for uncollectible receivables was increased by $5,670.

 
Required

  1. Prepare journal entries for the preceding transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

 

b. Prepare the revenues, gains, and other support without donor restrictions section of Evanston General Hospital’s statement of operations for the current year.

10. The Edwards Lake Community Hospital balance sheet as of December 31, 2019, follows:

EDWARDS LAKE COMMUNITY HOSPITAL

Balance Sheet

As of December 31, 2019

Assets

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

 

 

 

 

$

512,000

 

 

Accounts and notes receivable (net of uncollectible accounts of $17,700)

 

 

 

 

 

 

28,400

 

 

Inventory

 

 

 

 

 

 

101,400

 

 

Total current assets

 

 

 

 

 

 

641,800

 

 

Assets limited as to use:

 

 

 

 

 

 

 

 

 

Cash

 

$

19,040

 

 

 

 

 

 

Investments

 

 

238,720

 

 

 

 

 

 

Total assets limited as to use

 

 

 

 

 

 

257,760

 

 

Property, plant, and equipment:

 

 

 

 

 

 

 

 

 

Land

 

 

219,600

 

 

 

 

 

 

Buildings (net of accumulated depreciation of $1,624,900)

 

 

2,902,500

 

 

 

 

 

 

Equipment (net of accumulated depreciation of $1,026,400)

 

 

1,862,600

 

 

 

 

 

 

Total property, plant, and equipment

 

 

 

 

 

 

4,984,700

 

 

Total assets

 

 

 

 

 

$

5,884,260

 

 

Liabilities and Net Assets

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

$

21,100

 

 

Accrued payroll

 

 

 

 

 

 

48,800

 

 

Current portion of mortgage payable

 

 

 

 

 

 

595,000

 

 

Total current liabilities

 

 

 

 

 

 

664,900

 

 

Long-term debt—mortgage payable

 

 

 

 

 

 

2,690,000

 

 

Total liabilities

 

 

 

 

 

 

3,354,900

 

 

Net assets:

 

 

 

 

 

 

 

 

 

Without donor restrictions

 

 

 

 

 

 

 

 

 

Undesignated

 

 

2,092,260

 

 

 

 

 

 

Designated for plant

 

 

255,860

 

 

 

 

 

 

With donor restrictions

 

 

181,240

 

 

 

2,529,360

 

 

Total liabilities and net assets

 

 

 

 

 

$

5,884,260

 

 

 

The following are the transactions of Edwards Lake Community Hospital during the fiscal year ended December 31, 2020.


(1) Information related to accrual of revenues and gains is as follows:


Patient services revenue, gross

$

3,502,800

Charity care

 

220,760

Contractual adjustments to patient service revenues

 

1,539,000

Other operating revenues

 

1,002,550

 

(2) Cash received includes

Interest on investments in Assets Limited as to Use

 

9,250

Collections of receivables

 

2,965,800

 

(3) Expenses of $900,500 were recorded in accounts payable and $1,465,790 in accrued payroll. Because some of the nursing expenses met a net asset restriction, $103,500 was released from restrictions.
 

 

 

 

Administration expenses

 

455,980 

General services expenses

 

529,110 

Nursing services expenses

 

1,033,700 

Other professional services expenses

 

347,500 



(4) Cash paid includes:
 

 

 

 

Interest expense (allocated half to nursing services and half to general services)

$

299,000

Payment on mortgage principal

 

595,000

Accounts payable for purchases

 

840,600

Accrued payroll

 

1,289,000



(5) Interest of $2,130 accrued on investments in Assets Limited as to Use.
(6) Depreciation charges for the year amounted to $126,500 for the buildings and $138,000 for equipment. Depreciation was allocated 45 percent to nursing services, 15 percent to other professional services and 20 percent to each administrative and general services.
(7) Other information:
      (a) Provision for uncollectible receivables was determined to be adequate.
      (b) Supplies inventory balances:

 

 

 

12/31/2019

 

12/31/2020

 

Administration

 

$

13,700

 

 

 

$

11,100

 

 

General services

 

 

14,400

 

 

 

 

18,500

 

 

Nursing services

 

 

26,500

 

 

 

 

20,600

 

 

Other professional services

 

 

46,800

 

 

 

 

59,000

 

 

Totals

 

$

101,400

 

 

 

$

109,200

 

 


    
      (c) Portion of mortgage payable due within one year, $595,000.

(8) A $701 unrealized loss on investments occurred.
(9) Nominal accounts were closed. Necessary adjustments were made to increase the Net Assets—Without Donor Restrictions, Designated for Plant.

  1. Required

a-1. Prepare journal entry for the preceding transactions during the fiscal year ended December 31, 2020, assuming that Edwards Lake Community Hospital is a not-for-profit hospital.

  1. a-2. Prepare closing entries for the fiscal year ended December 31, 2020, assuming that Edwards Lake Community Hospital is a not-for-profit hospital.
  2. b. Prepare a balance sheet as of December 31, 2020.
  3. c-1. Prepare a statement of operations for the year ended December 31, 2020.
  4. c-2. Prepare a statement of changes in net assets for the year ended December 31, 2020.
  5. d. Prepare a statement of cash flows for the year ended December 31, 2020.


 

 

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