Homework answers / question archive / Chapter 16 – Homework   The AICPA Audit and Accounting Guide Health Care Entities is considered category b authoritative guidance that can be used by which of the following?   A business-type governmental hospital A not-for-profit hospital A for-profit hospital All of the above   A not-for-profit hospital would present all of the following financial statements, except a:   Balance sheet or statement of financial position Statement of functional expenses Statements of operations Statements of cash flows

Chapter 16 – Homework   The AICPA Audit and Accounting Guide Health Care Entities is considered category b authoritative guidance that can be used by which of the following?   A business-type governmental hospital A not-for-profit hospital A for-profit hospital All of the above   A not-for-profit hospital would present all of the following financial statements, except a:   Balance sheet or statement of financial position Statement of functional expenses Statements of operations Statements of cash flows

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Chapter 16 – Homework

 

1. The AICPA Audit and Accounting Guide Health Care Entities is considered category b authoritative guidance that can be used by which of the following?

 

• A business-type governmental hospital
• A not-for-profit hospital
• A for-profit hospital
• All of the above

 

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

 

• Balance sheet or statement of financial position
• Statement of functional expenses
• Statements of operations
• Statements of cash flows.

 

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

 

• All health care organizations are required to report a performance indicator.
• Only governmental health care organizations are required to report a performance indicator
• The purpose of reporting a performance indicator is to make it easier to compare the results of operations of not-for profit health care organizations to those of for-profit health care organizations.
• The purpose of reporting a performance indicator is to assist in evaluating the efficiency and effectiveness of a health care organizations operating activities

 

 

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

 

• Patient service revenue
• Administrative service revenue
• Other revenue
• Nonoperating gains

 

 

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

 

• Real estate donated to build a clinic for the homeless
• Cash contributed which the board is considered setting aside for self-insurance
• Investments bequeathed to the health care organization where the income is to be used to fund operating costs for a cancer clinic
• Funds from a sale bonds that are required by covenant to be used to build a new hospital

 

 

 

6. Why are health organizations motived to track the actual costs of services?

 

• Both GASB and FASB require it
• They must report their actual expenses to that third-party payors will reimburse the.
• Third-party payors contract with the organization to reimburse a set amount, and the organization risks a loss if costs are greater than the amount reimbursed
• Any amount not reimbursed by a third-party payor or paid by the patient must be included in the amount reported as charity care.

 

7. The controller for Bloomingfield Regional Hospital estimated that the uncollectible patient accounts have increase by $152,000. The controller’s journal entry included a debit to bad debt expense and a credit to allowance for uncollectible receivables. Based on this, Bloomingfield Regional Hospital is

 

• An investor-owned health care organization
• A nongovernmental not-for profit health care organization
• A governmental not-for profit health care organization
• Properly recording the estimate for uncollectible accounts under the FASB and GASB standards.

 

 

8. 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?

 

• Noncapital financing activities
• Operating activities
• Financing activities
• Investing activities

 

 

9. The patient protection and affordability act, passed in 2010

 

• Is unlike to impact accounting and financial reporting for health care organizations
• May or may not impact form 990 filings for 501(c)(3) health care organizations
• Requires health care organizations to implement new costs accounting systems where each service related to a medical procedure is tracked and submitted for payment separately
• Could impact the security and integrity of a health organization’s accounting information system

 

 

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

 

• Current ratio
• Debt-to capitalization
• Excess margin
• Debt services coverage

 

 

11. Craig Community Hospital, a not-for profit hospital, recorded the following transactions.

Required

For each transactions, indicate which revenue classification would be affected by selecting the appropriate revenue or gain classification from the list

 

1. Received $20 as a co-payment from a patient for an out-patient visit.  Billed $500 to insurance
2. Gift shop sales amounted to $1,500
3. Citizen’s health insurance paid $350 as final payment on the $500 billed for the patient in transaction 1
4. The hospital provided medical care valued at $20,000 for homeless citizens
5. A grateful patient contributed $1,000 for unrestricted use by the hospital
6. The
7. The local retirees association contributed $2,000 of labor at the hospital information desk
8. The hospital received a $10,000 federal grant to provide immunizations to children
9. Patient accounts of $500 were written off a uncollectible
10. Pharmaceutical firms donated recently approved drugs valued at $5,000.  The hospital uses a similar type drug in its operations.

 

12..  following are several unrelated transactions involving a hospital

 

1. Prepare journal entries to record the foregoing transactions assuming the hospital is a not-for profit facility

 

1. The hospital has a contractual agreement with a lender requiring that $500,000 in cash be set aside to meet its future debt payment

 

 

2. The hospital accrued $1,500,000 in patient service revenues.  Charity services of $415,000 were also provided.  Contractual adjustments total $535,000

 

3. An increase of $45,000 was recorded for bad debts

 

4. General services of $100,000 were donated by technicians.  Normally, the hospital would have purchased these specialized services

 

5. An endowment contribution of $1,500,000 was received

 

6. Investments held by the hospital increased in fair value by $32,000

 

 

7. The hospital purchased $837,000 in equipment with resources that had been contributed in prior years for such a purchase.

 

7b.  Record the transfer of net assets released from restrictions

 

2. Record journal entries to record the foregoing transactions, assuming the hospital is a business-type government facility.

 

1.  The hospital has a contractual agreement with a lender requiring that $500,000 in cash be set aside to meet its future debt payment

 

2. The hospital accrued $1,500,000 in patient service revenues.  Charity services of $415,000 were also provided.  Contractual adjustments total $535,000

 

(The journal entry is the same as the governmental facility)

3. An increase of $45,000 was recorded for bad debts

 

(The journal entry is the same for the government facility.  The provision for Bad Debts account represents a contra-revenue account for the NFP and the government facility.)

 

4. General services of $100,000 were donated by technicians.  Normally, the hospital would have purchased these specialized services

 

(No journal entry required)

 

5. An endowment contribution of $1,500,000 was received

 

6. Investments held by the hospital increased in fair value by $32,000

 

7. The hospital purchased $837,000 in equipment with resources that had been contributed in prior years for such a purchase.

 

13..  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.  Prepare journal entries for the preceding transactions

 

1. Services provided to inpatients and outpatients amounted to $9,600,000, of which $450,000 was for charity care, $928,000 was paid by uninsured patients, and $8,222,000 was billed to Medicare, Medicaid, and insurance companies.

 

2. Donated pharmaceuticals and medical supplies valued at $265,000 were received and utilized as general expenses.

 

3. Medicare, Medicaid, and third-party payors (insurance companies) approved and paid $5,365,000 of the $8,222,000 billed by the hospital during the year (see transaction 1).

 

 

4. An unconditional contribution of $5,000,000 was received in cash from a donor to construct a new facility for care of Alzheimers patients. The full amount is expendable for that purpose. No activity occurred on this project during the current year.

 

5. A total of $965,000 was received from the following activities/sources: cafeteria and gift shop sales, $710,000; medical seminars, $125,000; unrestricted transfers from the Evanston General Hospital Foundation, $75,000; and fees for medical transcripts, $55,000.
6. Uncollectible accounts totaling $3,250 were written off.
7. The allowance for uncollectible receivables was increased by $1,170.

 

 

2. Prepare the unrestricted revenues, gains, and other support section of Evanston General Hospital’s statements of operations for the current year.

 

 

14..  During 2017, the following selected events and transactions were recorded by Milos County Hospital

a.  Prepare journal entries for each of the transactions in accordance with the standards for a governmental health care entity that follows proprietary fund accounting.

1.  Gross charges for hospital services, all charged to accounts and notes receivable, were as follows:

 

           

            2.  The hospital cafeteria and gift shop had cash sales of $295,300

 

            3.  Additional information determined subsequently to recording patient service revenues and relating to the current-year is as follows:

           

           

            4.  A federal cost reimbursement research grant of $350,000 was awarded.  As of the end of the year, $200,000 in expenses related to the grant had been made.

 

1.  Record the payment for expenses related to research

 

 

2. Record the reimbursement of research expenses from the grants and contributions account.

 

 

 

            5.  Vouchers totaling $1,326,540 were issued for the following items:

 

                        Fiscal and administrative services expenses               $194,440

                        General services expenses                                           253,100

                        Nursing services expenses                                           585,000

                        Other professional services expenses                          185,600

                        Inventory                                                                     101,200

                        Expenses accrued at December 31, 2017                   7,200

 

 

                       

 

                                   

6.  Collections of accounts receivable totaled $1,159,000.  Accounts written off as uncollectible amounted to $11,900

 

 

7..  Cash payments on vouchers payable (paid to employers and suppliers) during the year were $1,031,200

 

8. Supplies of $99,770 were issued to nursing services

 

9. On December 31, 20147 accrued interest income on investments was $800

 

10. Depreciation of buildings and equipment was as follows:

 

Building           $51,000

Equipment       73,000

 

 

 

           

a-2. Prepare closing entries in accordance with the standards for a governmental health care entity that follows proprietary fund accounting

 

1. Record the closing entries for the year.
2. Calculate the net patient service revenue that would be reported on the statement of revenues, expenses, and changes in net position