Revenue and Related Transactions

Revenue and Related Transactions.

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).

  • Services provided to inpatients and outpatients amounted to $9,520,000, of which $550,000 was for charity care, $970,000 was paid by uninsured patients, and $8,000,000 was billed to Medicare, Medicaid, and insurance companies.
  • Donated pharmaceutical and medical supplies valued at $340,000 were received and utilized as general expenses.
  • Medicare, Medicaid, and third-party payors (insurance companies) approved and paid $6,000,000 of the $8,000,000 billed by the hospital during the year (see transaction 1).
  • An unconditional contribution of $6,000,000 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.
  • 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.
  • Uncollectible accounts totaling $4,250 were written off. The allowance for uncollectible receivables was increased by $1,000.

Using this information:

  1. Record the preceding transactions in general journal form.
  2. Prepare the unrestricted revenues, gains, and other support section of Evanston Dearborn General Hospital’s statement of operations for the current year, following the format in Illustration 16­4.
  3. On which statement would restricted contributions be reported? Explain.

Governmental Hospital.

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

  • Gross charges for hospital services, all charged to accounts and notes receivable, were as follows:
Patient service revenues $1,664,900
  • The hospital cafeteria and gift shop had cash sales of $295,300.
  • Additional information relating to current-year is as follows:
Contractual adjustments. $632,000
Provision for bad debts $30,200
Charity Care $261,400
  • 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. (Hint: See Chapter 4 for eligibility requirements.)
  • 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
  • Collections of accounts receivable totaled $1,159,000. Accounts written off as uncollectible amounted to $11,900.
  • Cash payments on vouchers payable (paid to employers and suppliers) during the year were $1,031,200.
  • During the year, the hospital received unrestricted cash contributions of $50,000 and unrestricted cash income from endowment investments of $6,500.
  • Supplies of $99,770 were issued to nursing services.
  • On December 31, 2017, accrued interest income on investments was $800.
  • Depreciation of buildings and equipment was as follows:
Buildings $51,000
Equipment $73,000
  • On December 31, 2017, closing entries were made in the general journal.

Using this information,

  1. Show in general journal form the entries that should be made for each of the transactions and the closing entries in accordance with the standards for a governmental health care entity that follows proprietary fund accounting, as discussed in this chapter and Chapter 7.
  2. Using the available information, calculate the net patient service revenue that would be reported on the statement of revenues, expenses, and changes in net position.

Transaction Analysis and Statements.

Congress authorized the Flood Control Commission to start operations on October 1, 2017.

  1. Record the following transactions in general journal form as they should appear in the accounts of the Flood Control Commission. Record all expenses in the Operating/Program Expenses account.
  • The Flood Control Commission received official notice that the one- year appropriation passed by Congress and signed by the President amounted to $7,000,000 for operating expenses.
  • The Office of Management and Budget notified the Commission of the following schedule of apportionments: first quarter, $2,000,000; second quarter, $2,000,000; third quarter, $1,500,000; and fourth quarter, $1,500,000.
  • The Flood Control Commissioner allotted $1,000,000 for the first month’s operations.
  • Obligations were recorded for salaries and fringe benefits, $400,000; furniture and equipment, $270,000; materials and supplies, $250,000; and rent and utilities, $50,000. The Commission does not record commitments prior to recording obligations.
  • Payroll for the first two weeks in the amount of $170,000 was paid.
  • Invoices approved for payment totaled $395,000; of the total, $180,000 was for furniture and equipment, $175,000 for materials and supplies, and $40,000 for rent.
  • A liability was recorded for the payroll for the second two weeks, $160,000, and for the employer’s share of FICA taxes for the four weeks, $23,000. (Note: Credit to Accrued Funded Payroll and Benefits.)
  • Accounts payable totaling $189,000 were paid, which included liabilities for materials and supplies, $149,000, and rent, $40,000. Accrued Funded Payroll and Benefits in the amount of $183,000 were paid.
  • Accruals recorded at month-end were salaries, $30,000, and utilities, $10,000. Materials and supplies costing $60,000 were used during the month. Depreciation of $2,500 was recorded on furniture and equipment for the month. (Note: In practice, this would likely be done in worksheet form for monthly reporting purposes.)
  • Necessary closing entries were prepared as of October 31, 2017. (Note: Again, for monthly statements, this would be a worksheet entry only.)
  1. Prepare the Balance Sheet of the Flood Control Commission as of October 31, 2017, assuming that all of the Commission’s assets are entity assets, Fund Balance with Treasury is intragovernmental, and all other assets are governmental.
  2. Prepare the Statement of Changes in Net Position of the Flood Control Commission for the month ended October 31, 2017.
  3. Prepare the Statement of Budgetary Resources of the Flood Control Com- mission for the month ended October 31, 2017.

 

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