Problem 3 –
The following information was derived from the accounts and records of Mockingbird State
University for 20X3. All amounts are in thousands of dollars.
Tuition and fees
Total assessed…………………………………………………………………………………………. $4,000
Expected uncollectible…………………………………………………………………….…….… 80
Appropriations
State………………………………………………………………………………………………………. 800
Auxiliary enterprises
Sales………………………………………………………………………………………….…….……. 500
Salaries……………………………………………………………………………………………..…… 280
Other expenses…………………………………………………………………………………….…. 140
Endowment income
Restricted to research………………………………………………………………………..….…. 370
Private gifts and grants
Restricted to student scholarships……………………………………………………….….…. 0,200
Restricted to plant expansion……………………………………………………………….…… 2,000
Unrestricted………………………………………………………………………………………….… 180
Expenses:
Instruction………………………………………………………………………………..……….…… 3,100
Research………………………………………………………………………………………….….…. 600
Student services………………………………………………………………….…….…….……... 220
Institutional support…………………………………………………………………..…….……… 190
Operation of plant…………………………………………………………………….….…….…… 180
Mortgage payment ($10,000 interest)…………………………………………………………..…. 15
Scholarships allowances……………………………………………………………..…….…….……. 200
Net positon, January 1, 20X3…………………………………………………………………………. 3,827
Mockingbird State University reports as a special purpose government engaged only in business-
type activities.
Requirement: Prepare a statement of revenues, expenses, and changes in net position for
Mockingbird State University for 20X3.
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Answer:
Mockingbird State University
Statement of Revenues, Expenses, and Changes in Net Position
For the Year Ended December 31, 20X3
Revenues
Operating Revenues
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Problem 4 – College & University Annuity Gift Transactions
Dogwood State University is a government university that reports as a special government
engaged only in business-type activities. Listed below are selected transactions that affect its
annuity gifts. All amounts are in thousands of dollars.
Transactions:
1. At the beginning of the year, the college receives cash of $200 with a stipulation that the
donor be paid $25 a year for 10 years. The present value of the payment to the donor is
$175.
2. Investments in the amount of $195 are purchased.
3. Payments of $25 are made to the donor at year end.
4. Investment income of $13 is received during the year.
5. The present value of the annuity payable to the donor at year end was $162.
Requirement: Prepare the necessary journal entries to record these transactions.
Answers:
# Accounts Debit Credit
1 Cash 200
Annuities Payable 175
Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Problems – Chapter 18
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Problem 1 – Government Hospital Journal Entries
Listed below are selected transactions from the City of Watertown Hospital. All amounts are in
thousands of dollars.
Transactions:
1. The hospital provided patient services during the year that had standard charges of
$12,500. Contractual adjustments awarded to patients under contracts with insurance
companies and under government programs totaled $2,000. Uncollectible accounts are
expected to be approximately $800.
2. Nursing and other professional salaries paid during the year totaled $2,300.
3. Depreciation for the year was $500 for the building and $900 for equipment.
4. Medical supplies costing $2,600 were purchased during the year. The inventory of
supplies increased from $200 at the beginning of the year to $300 at year end.
5. The hospital received a $4,000 to be used for the purchase of specialized diagnostic
equipment.
6. The hospital received a $500 gift to be used for providing specialized coronary care
services to patients.
7. The hospital purchased $2,000 of diagnostic equipment with the donation received for
that purpose.
8. The hospital incurred $400 of operating expenses for the care of coronary patients
consistent with the purposes of that donation.
9. The hospital issued $5,000 of 20-year, 8% bonds at par at mid-year to finance a new
addition for the hospital.
10. The hospital estimates that malpractice claims against the hospital of $400 ultimately will
result in liabilities of $100 that will have to be paid–but probably will not have to be paid
during the next fiscal year.
Requirement: Prepare the journal entries required of a government hospital for these
transactions.
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Answers:
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# Accounts Debit Credit
1a Accounts Receivable 12,500
# Accounts Debit Credit
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Problem 2 – Hospital Reporting Discussion Questions
Briefly answer the following questions on hospital reporting:
1. Identify the financial statements that must be presented for a government hospital.
2. How are the financial statements for a government hospital different from the financial
statements for a not-for-profit hospital?
Answers:
1. The required statements for a government hospital are:
Statement of Net Position
Statement of Revenues, Expenses, and Changes in Net Position
Statement of Cash Flows
2. Although there are many similarities among the financial statements for a government
hospital and a not-for-profit hospital, the key differences are:
Net assets for not-for-profit hospitals are classified as unrestricted, temporarily
restricted, and permanently restricted. Net position for government hospitals are
classified as unrestricted, restricted, and net investment in capital assets.
Not-for-profit hospitals report a statement of operations and a statement of changes in
net assets. Government hospitals report a statement of revenues, expenses, and
changes in net position.
Not-for-profit hospitals report changes in all three categories of net assets.
Government hospitals report only changes in total net position.
Not-for-profit hospitals report assets released from restrictions. Government hospitals
do not report assets released from restrictions.
Not-for-profit hospitals follow FASB cash flow statement guidance (three sections).
Not-for-profit hospitals may prepare the statement using either the indirect method or
the direct method. Government hospitals follow GASB cash flow statement guidance
(four sections). Government hospitals must prepare the statement using the direct
method.
Government hospitals defer revenue recognition on reimbursement grants until
qualifying costs are incurred. Nongovernment, not-for-profit hospitals do not.
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Problem 3 – Government Hospital Financial Reporting
The following selected information is taken from the accounting records of the Jackson County
Hospital for fiscal year 20X0. All accounts have a normal balance and are listed in alphabetical
order. Also, all amounts are in thousands of dollars.
Administrative expenses…………………………………………………………………….…….…… $440
Cafeteria sales…………………………………………………………………………………..…….…… 440
Charity services (at gross amounts) …………………………………………………….…….…… 500
Contractual adjustments………………………………………………………………………………… 1,100
Depreciation—Building………………………………………………………………………….….…. 1,400
Depreciation—Other…………………………………………………………………………………..… 2,740
Estimated uncollectible accounts……………………………………………………………..…….. 710
Federal grant restricted for heart research (all eligibility requirements met)............ 1,300
Fiscal service expenses………………………………………………………………….….…….……. 300
Gain on sale of capital assets………………………………………………………….….…….……. 75
General services expenses……………………………………………………………………………… 1,100
Gross patient service charges…………………………………………………………………..….…. 18,000
Income from investments of endowment—donor restricted to heart research…....... 870
Other professional services expense…………………………………………………..….…….…. 890
Net investment in capital assets, January 1………………………………………………………. 15,000
Nursing services expense………………………………………………………………………..….…. 8,000
Proceeds from bond issue for building addition………………………………..….…….……. 22,000
Restricted net position, January 1………………………………………………………..…….…… 3,200
State appropriations—capital……………………………………………………………………….… 700
State appropriations—operating…………………………………………………..…….…….……. 500
Unrestricted contributions……………………………………………………………………………... 350
Unrestricted net position, January 1………………………………………………………………… 9,000
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