Following are several unrelated transactions involving a hospital. The hospital has a contractual agreement with a lender requiring that $400,000 in cash be set aside to meet its future debt payment. The hospital accrued $1,200,000 in patient service revenues. Charity services of $500,000 also were provided. Contractual adjustments total $600,000. An increase of $50,000 was recorded for bad debts. Recently retired nurses volunteered to assist with a spike in patient demand due to an infectious disease outbreak. The value of these services was estimated to be $200,000, and the hospital normally would have purchased these specialized services. An endowment contribution of $1,900,000 was received. Investments held by the hospital increased in fair value by $45,000. The hospital purchased $840,000 in equipment with resources that had been contributed in prior years for such a purchase. Record the $400,000 cash receipt to be reinvested in investments to meet its future debt payment. Record the $1,200,000 revenue accrued for patient services, $500,000 for Charity services and Contractual adjustments to receivables total $600,000. Record the $50,000 increase in bad debts. Record the $200,000 general services donated by technicians, which otherwise have to be purchased. Record the $1,900,000 endowment contribution received. Record the $45,000 increase in the fair value of investments held by the hospital. Record the purchase of equipment with resources for $840,000.

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 4RE

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Question

Following are several unrelated transactions involving a hospital.

The hospital has a contractual agreement with a lender requiring that $400,000 in cash be set aside to meet its future debt payment.
The hospital accrued $1,200,000 in patient service revenues. Charity services of $500,000 also were provided. Contractual adjustments total $600,000.
An increase of $50,000 was recorded for bad debts.
Recently retired nurses volunteered to assist with a spike in patient demand due to an infectious disease outbreak. The value of these services was estimated to be $200,000, and the hospital normally would have purchased these specialized services.
An endowment contribution of $1,900,000 was received.
Investments held by the hospital increased in fair value by $45,000.
The hospital purchased $840,000 in equipment with resources that had been contributed in prior years for such a purchase.

Record the $400,000 cash receipt to be reinvested in investments to meet its future debt payment.
Record the $1,200,000 revenue accrued for patient services, $500,000 for Charity services and Contractual adjustments to receivables total $600,000.