Exam 12: Accounting for Hospitals and Other Health Care Providers

Both commercial and no-for-profit hospitals in the private sector follow FASB standards.

A hospital reported the following uncollectible amounts: $ 10,000 for services rendered to homeless individuals with no intention of collection. $ 15,000 for services rendered with the expectation of collection, but proved to be uncollectible. What amount should be reported in revenues and bad debt expense for these items?

The AICPA Health Care Guide provides additional guidance regarding accounting and reporting requirements for voluntary health and welfare organizations.

Sam Smith died, leaving a will that provided that $1,000,000 be transferred to a not-for-profit hospital. The hospital is to invest the funds for 10 years and give $40,000 each year to the granddaughter. At the end of the 10 years, the $1,000,000 can be used for any purpose desired by the hospital. Which of the following is true?

St. Martha's Hospital, a private not-for-profit, began the year 2009 with the following trial balance: Credits Cash 504,000 Patient Accounts Receivable 620,000 Allowance for Contractual Adjustments 144,000 Property, Plant, and Equipment - Net of 900,000 Depreciation Accounts Payable 240,000 Unrestricted Net Assets 1,400,000 Temporarily Restricted Net Assets 240,000 2,024,000 2,024,000 Transactions for 2009 are as follows: (a) Collected $310,000 of the Patient Accounts Receivable that were outstanding at 12-31-08. Actual contractual adjustments on these receivables totaled $160,000. (b) The Hospital billed patients $2,160,000 for services rendered. Of this amount, 5% is expected to be uncollectible. Contractual adjustments with insurance companies are expected to total $321,000. (Hint: use an allowance account to reduce accounts receivable for estimated contractual adjustments). (c) In 2008 the Hospital had received a contribution of $240,000 to purchase new ultrasound equipment. The equipment was purchased for $200,000 in 2009. (d) Charity care in the amount of $45,000 (at standard charges) was performed for indigent patients. (e) The Hospital received $624,000 in securities to establish a permanent endowment. Income from the endowment is unrestricted. (f) Other revenues collected in cash were: gift shop $11,000 and cafeteria $29,000. (g) The Hospital received in cash unrestricted interest income on endowments of $6,000. Unrealized gains on endowment investments totaled $9,000. (h) Expenses amounting to $1,120,000 for Professional Care of Patients, $310,000 for General Services and $190,000 for Administration were paid in cash. (i) Depreciation on fixed assets, including the ultrasound equipment, totaled $114,000 for the year. ($90,000 for Professional Care of Patients, $18,000 for General Services and $6,000 for Administration.) (j) Closing entries were prepared. Required: A. Record the transactions described above. B. Prepare in good form, a Statement of Operations for the year ended December 31, 2009 C. Prepare in good form, a Statement of Changes in Net Assets for the year ended December 31, 2009.

Which of the following is not true regarding financial reporting of health care entities?

Contractual allowances for amounts billed to 3^rd parties are treated as:

Private for-profit health care organizations follow FASB standards excluding those written specifically for not-for-profits.

An unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for future use is called:

A private sector not-for-profit hospital received a gift of $100,000 cash on the first day of 2009 with a donor restriction that the resources be used to purchase certain equipment. The equipment was purchased on the same day and is expected to last five years with no salvage value. The Statement of Financial Position as of December 31, 2009 would reflect as net assets of:

Health care organizations that are privately owned and operated to provide a return to investors follow which standards:

A private sector, not-for-profit hospital received a pledge of $100,000 in 2008 to be used for a building to be constructed in 2009 but contingent on the hospital being able to raise an equivalent amount from other donors. As of the end of 2008, the amount had not been raised from other donors. In 2009, the hospital raised the amount from other donors. The donor gave the $100,000 to the hospital in 2009 and the building was completed in 2009. In which year should the hospital recognize the $100,000 from the pledge?

Which of the following is false regarding revenues of health care organizations:

The level of charity care should be disclosed in the notes to financial statements.

Health care organizations that are privately owned and operated to provide a return to investors follow GASB standards.

Differences between actual and estimated contractual adjustments require restatement of prior periods.

Governmental owned health care providers use the accrual basis of accounting and the economic resources measurement focus.

Patient Service Revenue of hospitals is to be presented net of contractual adjustments in the Statement of Operations.

Which of the following is not true regarding accounting and financial reporting for private not-for-profit hospitals?

According to The Audit and Accounting Guide, Transfers among affiliated organizations should be included in the determination of a performance indicator for a health care organization?