Accounting For Governmental & Nonprofit Entities
Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781259917059
Author: RECK, Jacqueline L., Lowensohn, Suzanne L., NEELY, Daniel G.
Publisher: Mcgraw-hill Education,
Question
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Chapter 16, Problem 24EP

a.

To determine

Prepare journal entry to record the given transaction by assuming Hospital E is a not-for profit organization.

a.

Expert Solution
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Explanation of Solution

Not for profit organizations: The business entities whose motive of business is not to reap economic benefits and to provide services for the well-being of society.

Prepare journal entry to record the given transaction by assuming Hospital E is a not-for profit organization.

Transaction  NumberAccount TitleDebit ($)Credit ($)
1.Accounts and notes receivable2,979,650 
 Contractual adjustments1,520,000 
 Patients service revenue 3,500,900
 Other operating revenues 998,750
 (To record accrual of revenues and gains)  
    
2.Cash2,960,600 
 Assets limited as to use-Cash7,350 
 Accounts and notes receivable 2,960,600
 Investment income-without donor restrictions 7,350
 (To record cash receipts)  
    
3.Administration expenses446,480 
 General service expenses524,360 
 Nursing services expenses1,031,800 
 Other professional services expense342,750 
 Accounts payable 891,000
 Accrued payroll 1,454,390
 (To record accounts payable)  
    
 Net assets released from restriction-with donor restrictions94,000 
 Net assets released from restriction-without donor restrictions 94,000
 (To record release of restricted net assets)  
    
4.Nursing services expenses140,000 
 General services expenses140,000 
 Mortgage payable500,000 
 Accounts payable836,800 
 Accrued payroll1,279,500 
 Cash 2,896,300
 (To record cash payments)  
    
5.Assets limited to use-interest receivable1,180 
 Investment income-without donor restrictions 1,180
 (To record release of restricted net assets)  
    
6.Administration expense49,100 
 General services expense49,100 
 Nursing services expense110,475 
 Other professional service expenses36,825 
 Accumulated depreciation-building 117,000
 Accumulated depreciation-equipment 128,500
 (To record allocation of expense)  
    
7. (a)No entry is required   
    
7. (b)Inventory ($73,10071,000)2,100 
 Administration expense ($7,3008,000)700 
 Nursing services expense ($16,80017,000)200 
 Other professional services expense ($40,00037,300) 2,700
 General services expenses ($9,0008,700) 300
 (To record supplies inventory balances)  
    
7.(c)Mortgage payable500,000 
 Current portion of mortgage payable 500,000
 (To record mortgage payable due)  
    
8. Unrealized loss on investments663 
 Assets limited as to use-investments 663
 (To record unrealized loss in investments)  
    
 Closing entry:  
9.Patient services revenue3,500,900 
 Other operating revenues998,750 
 Investment income-without donor restriction8,530 
 Contractual adjustments 1,520,000
 Administration services expenses 496,280
 General services expense 713,160
 Nursing services expense 1,282,475
 Other professional services expense 376,875
 Unrealized loss on investment 663
 Net assets-without donor restrictions, undesignated 118,727
 (To record the closing entry for revenues)  
    
 Net assets-without donor restrictions-undesignated7,867 
 Net assets-without donor restrictions-designated for plant 7,867
 (To record closing entry for unrestricted net assets)  
    
 Net assets-with donor restrictions94,000 
 Net assets released from restriction-without donor restriction94,000 
 Net assets-without donor restrictions 94,000
 Net assets released from restriction-with donor restrictions 94,000
 (To record closing entry for temporarily restricted and unrestricted)  

(Table 1)

Note:

  • Transaction 7 (a): journal entry is not required to be provided for the provision for uncollectible receivable as they are identified to be adequate.

b.

To determine

Prepare a balance sheet for Hospital E as of December 31, 2020.

b.

Expert Solution
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Explanation of Solution

Prepare a balance sheet for Hospital E as of December 31, 2020.

Hospital E
Balance sheet
For the year ended December 31,2020
(000s omitted)
ParticularsAmount in $Amount in $
Assets  
Current assets:  
Cash 323,600
Accounts and notes receivable (net of uncollectible accounts of $15,800) 45,550
Inventory 73,100
Total current assets 442,250
Assets limited as to use:  
Cash24,490 
Interest receivable1,180 
Investments228,557 
Total assets limited as to use 254,227
Property , plant and equipment:  
Land 210,100
Building (Net of accumulated depreciation of  $1,740,000) 2,776,000
Equipment (Net of accumulated depreciation of  $1,153,000) 1,730,300
Total property, plant and equipment 4,716,400
Total assets 5,412,877
   
Liabilities and net assets  
Current liabilities:  
Accounts payable 73,400
Accrued payable 219,890
Current portion of bonds payable 500,000
Total current liabilities 793,290
Long term debt-mortgage payable 2,000,000
Total liabilities 2,793,290
Net assets:  
Without donor restrictions, undesignated2,287,620 
With donor restrictions, designated 254,227 
With donor restrictions77,7402,619,587
Total liabilities and net assets 5,412,877

(Table 2)

c.

To determine

Prepare a statement of operations for Hospital for the year ended December 31, 2020.

c.

Expert Solution
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Explanation of Solution

Prepare a statement of operations for Hospital for the year ended December 31, 2020.

Hospital E
Statement of Operations
For the year ended December 31, 2020
(000s omitted)
ParticularsAmount in $Amount in $
Revenue without donor restrictions:  
Net patient service revenue  1,980,900
Other operating revenues 998,750
Total revenues 2,979,650
Expense and losses:  
Administration  expense496,280 
General services expense713,160 
Nursing services expense1,282,475 
Other professional services expenses376,875 
Total  expense 2,868,790
Excess of revenue over expense and losses 110,860
Non-operating gains (losses):  
    Investment income- without donor restrictions 8,530
Excess of revenue  and gains  over expense 119,390
Net assets released from restrictions:  
Satisfaction of purpose restrictions 94,000
Increase in net assets without donor restrictions 213,390

(Table 3)

Note:

  • Net patient service revenue is derived from deducting patient service revenue from the net of contractual adjustment that amounts to $1,520,000.

Prepare a statement of changes in net assets for the year ended September 30, 2020.

Hospital E
Statement of Changes in Net Assets
For the year ended December 31, 2020
(000s omitted)
ParticularsAmount in $Amount in $
Net assets without donor restrictions:  
Excess of revenue and gains over expense and losses 119,390
Unrealized loss on investments (663)
Net assets released from restrictions 94,000
Increase in net assets without donor restrictions 212,727
Net assets with donor restrictions:  
Net assets released from restrictions (94,000)
Increase in net assets 118,727
Net assets at beginning of the year 2,500,860
Net assets at the end of the year 2,619,587

(Table 4)

d.

To determine

Prepare a statement of cash flow for Hospital for the year ended December 31, 2020.

d.

Expert Solution
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Explanation of Solution

Prepare a statement of cash flow for Hospital for the year ended December 31, 2020.

Hospital E
Statement of cash flow
For the  year ended December 31,2020
ParticularsAmount in $
Cash flow from operating activities: 
Change in assets118,727
Adjustments to reconcile changes in net assets to net cash  provided by operating activities: 
Increase in accounts receivable (19,050)
Increase in interest receivable (1,180)
Increase in inventory(2,100)
Increase in accounts payable54,200
Increase in accrued payables 174,890
Depreciation 245,500
Unrealized loss on investments663
Net cash provided by operating activities571,650
Cash flows from financing activities: 
Payment on bond principal(500,000)
Net cash  used in financing activities(500,000)
Net increase in cash  and cash equivalents 71,650
Cash  and cash  equivalents, beginning of the year276,440
Cash and cash equivalents, end of  the year348,090

(Table 5)

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Students have asked these similar questions
Transactions (a) through (e) took place in Stoney Heights Private Hospital during the year ending December 31, 2019.a. Gross revenues of $5,000,000 were earned for service toMedicare patients.b. Expected contractual adjustments with Medicare, a third-party payor, are $2,500,000; and an allowance for contractual adjustments account is used by Stoney Heights.c. Medicare cleared charges of $5,000,000 with payments of $2,160,000 and total contractual allowances of $2,840,000 ($2,500,000 + $340,000).d. Interim payments received fromMedicare amounted to $250,000.e. The hospital made a lump-sum payment back toMedicare of $100,000.1. Record the transactions in the general journal.2. Calculate the amount of net patient service revenues.3. What is the net cash flow from transactions withMedicare?4. What adjustments must be made at year-end to settle up with Medicare and properly report the net patient service revenues after this settlement?
explanation please.
The following transactions relate to the General Fund of the City of Buffalo Falls for the year ended December 31, 2020: Contracts were issued for contracted services in the amount of $91,750. Note: Enter debits before credits.         Transaction General Journal Debit Credit 6a
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