Chapter 16 – Accounting for Health Care Organizations
16–16
Ch. 16, Solutions, Exercise 16-22, b. (Cont’d)
Note 1: Net patient revenue is the $9,150,000 from transaction 1, less the contractual adjustment
of $2,857,000 from transaction 3 and the increase in implicit price concessions of 1,170 from
transaction 6.
Note 2: Other revenue is the sum of the unrestricted contributions of 265,000 from transaction 2
plus the other revenues of 965,000 from transaction 5.
General Problem Information: Revenue and related transactions—journalize
Learning Objective: 16-3
Topic: Reporting and Accounting Issues
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application AICPA: BB: Measurement
Level of Difficulty: Hard
16-23. a. MILOS COUNTY HOSPITAL
GENERAL JOURNAL
Debits Credits
1. ACCOUNTS AND NOTES RECEIVABLE 1,664,900
PATIENT SERVICE REVENUE 1,664,900
3. CONTRACTUAL ADJUSTMENTS 632,000
PROVISION FOR BAD DEBTS 30,200
PATIENT SERVICES REVENUE 261,400
ACCOUNTS AND NOTES RECEIVABLE 893,400
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS 30,200
(Note that since at the time patient service revenue was recorded the amount of charity care was
unknown, a subsequent adjustment must be made to remove charity care from the revenue
transaction.)
Chapter 16 – Accounting for Health Care Organizations
16–17
Ch. 16, Solutions, Exercise 16-23, a. (Cont’d)
5. FISCAL AND ADMINISTRATIVE SERVICE
EXPENSES 194,440
GENERAL SERVICES EXPENSES 253,100
NURSING SERVICES EXPENSES 585,000
OTHER PROFESSIONAL SERVICES EXPENSES 185,600
INVENTORY 101,200
ACCRUED EXPENSES PAYABLE 7,200
VOUCHERS PAYABLE 1,326,540
7. VOUCHERS PAYABLE 1,031,200
CASH 1,031,200
9. ACCRUED INTEREST RECEIVABLE 800
INVESTMENT INCOME 800
11. Closing Entries:
PATIENT SERVICE REVENUE 1,403,500
INVESTMENT INCOME 800
REVENUE—GRANTS & CONTRIBUTIONS 200,000
REVENUE—OTHER 295,300
*NET POSITION—UNRESTRICTED 404,510
CONTRACTUAL ADJUSTMENTS 632,000
PROVISION FOR BAD DEBTS 30,200
*NOTE: Although it was not discussed in the chapter (see chapter 7), it would be necessary to
adjust Net Position—Unrestricted, Net Position—Restricted, and Net Position—Net
Investment in Capital Assets for the effects of depreciation (entry 10).
GASB standards require that net position be reported in these three categories:
unrestricted; restricted; and net investment in capital assets.
Chapter 16 – Accounting for Health Care Organizations
16–18
Ch. 16, Solutions, Exercise 16-23 (Cont’d)
b. Net patient service revenue would be:
Patient service revenue adjusted for charity care
General Problem Information: Governmental hospital—journalize
Learning Objective: 16-3
Topic: Reporting and Accounting Issues
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application AICPA: BB: Measurement
Level of Difficulty: Hard
16-24.
a. CHRISTINA REHABILITATION HOSPITAL
STATEMENT OF OPERATIONS
FOR YEAR ENDED SEPTEMBER 30, 2023
(000s omitted)
REVENUE, GAINS AND OTHER SUPPORT WITHOUT DONOR RESTRICTIONS:
NET PATIENT SERVICE REVENUE (note 1) $495,350
SALARY EXPENSE $338,520
SUPPLIES EXPENSE 140,610
DEPRECIATION EXPENSE 25,230
INTEREST EXPENSE 5,130
Chapter 16 – Accounting for Health Care Organizations
16–19
Ch. 16, Solutions, Exercise 16-24, a. (Cont’d)
CHRISTINA REHABILITATION HOSPITAL
STATEMENT OF CHANGES IN NET ASSETS
FOR YEAR ENDED SEPTEMBER 30, 2023
(000s omitted)
NET ASSETS WITHOUT DONOR RESTRICTIONS (see part 1 above):
EXCESS OF REVENUES AND GAINS OVER EXPENSES
NET ASSETS WITH DONOR RESTRICTIONS:
CONTRIBUTIONS FOR PROGRAMS 6,540
CONTRIBUTIONS FOR ENDOWMENT 130
INVESTMENT INCOME 470
UNREALIZED GAIN ON INVESTMENTS 590
NET ASSETS RELEASED FROM RESTRICTIONS (1,010)
INCREASE IN NET ASSETS WITH DONOR
Note 2: Because the natural classification of expenses is used on the statement, the hospital would
disclose the functional classifications in the notes.
b. CHRISTINA REHABILITATION HOSPITAL
BALANCE SHEET
AS OF SEPTEMBER 30, 2023
(000s omitted)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 45,525
Chapter 16 – Accounting for Health Care Organizations
Ch. 16, Solutions, Exercise 16-24, b. (Cont’d)
PLEDGES RECEIVABLE (NET OF DISCOUNT OF $910) 2,910
INVESTMENTS 198,000
PROPERTY, PLANT, & EQUIPMENT:
LAND $ 7,580
BUILDINGS $324,440
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 20,730
ACCRUED PAYABLES 26,790
INTEREST PAYABLE 1,070
CURRENT PORTION OF BONDS PAYABLE 15,000
TOTAL CURRENT LIABILITIES 63,590
NET ASSETS:
WITHOUT DONOR RESTRICTIONS 225,655
WITH DONOR RESTRICTIONS 112,430 338,085
TOTAL LIABILITIES AND NET ASSETS $686,375
General Problem Information: Not-for-profit hospital—financial statements
Learning Objective: 16-3
Chapter 16 – Accounting for Health Care Organizations
16–21
16-25. a.
EDWARDS LAKE COMMUNITY HOSPITAL
GENERAL JOURNAL ENTRIES
FISCAL YEAR 2023
Debits Credits
1. PATIENT ACCOUNTS RECEIVABLE 2,979,650
2. CASH 2,960,600
ASSETS LIMITED AS TO USE⎯CASH 7,350
PATIENT ACCOUNTS RECEIVABLE 2,960,600
INVESTMENT INCOME⎯WITHOUT DONOR
RESTRICTIONS 7,350
3. ADMINISTRATION EXPENSES 446,480
GENERAL SERVICES EXPENSES 524,360
Chapter 16 – Accounting for Health Care Organizations
16–22
Ch. 16, Solutions, Exercise 16-25, a. (3) (Cont’d)
EDWARDS LAKE COMMUNITY HOSPITAL
Debits Credits
NET ASSETS RELEASED FROM RESTRICTION—
WITH DONOR RESTRICTIONS 94,000
4. NURSING SERVICES EXPENSES 140,000
GENERAL SERVICES EXPENSES 140,000
MORTGAGE PAYABLE 500,000
ACCOUNTS PAYABLE 836,800
5. ASSETS LIMITED AS TO USE—INTEREST
RECEIVABLE 1,180
INVESTMENT INCOME⎯WITHOUT DONOR
RESTRICTIONS 1,180
6. ADMINISTRATION EXPENSES 49,100
Chapter 16 – Accounting for Health Care Organizations
16–23
Ch. 16, Solutions, Exercise 16-25, a, (Cont’d)
EDWARDS LAKE COMMUNITY HOSPITAL
Debits Credits
7(a). INVENTORY 2,100
ADMINISTRATION EXPENSES 700
Calculations:
73,100 – 71,000 = 2,100
7,300 – 8,000 = (700)
7(b). MORTGAGE PAYABLE 500,000
CURRENT PORTION OF MORTGAGE PAYABLE 500,000
9. Closing Entry:
PATIENT SERVICES REVENUE 3,500,900
OTHER OPERATING REVENUES 998,750
INVESTMENT INCOME⎯WITHOUT DONOR
Chapter 16 – Accounting for Health Care Organizations
16–24
Ch. 16, Solutions, Exercise 16-25, a. (9) (Cont’d)
EDWARDS LAKE COMMUNITY HOSPITAL
Debits Credits
GENERAL SERVICES EXPENSES 713,160
NURSING SERVICES EXPENSES 1,282,475
NET ASSETS⎯WITHOUT DONOR RESTRICTIONS⎯
UNDESIGNATED 7,867
NET ASSETS⎯WITHOUT DONOR RESTRCITIONS⎯
DESIGNATED FOR PLANT 7,867
NET ASSETS RELEASED FROM RESTRICTION—
WITH DONOR RESTRICTIONS 94,000
Chapter 16 – Accounting for Health Care Organizations
16–25
Ch. 16, Solutions, Exercise 16-25 (Cont’d)
b. EDWARDS LAKE COMMUNITY HOSPITAL
BALANCE SHEET
AS OF DECEMBER 31, 2023
ASSETS
CURRENT ASSETS:
CASH $ 323,600
PATIENT ACCOUNTS RECEIVABLE 45,550
INVENTORY 73,100
INTEREST RECEIVABLE 1,180
INVESTMENTS 228,557
TOTAL ASSETS LIMITED AS TO USE 254,227
PROPERTY, PLANT, AND EQUIPMENT:
LAND 210,100
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 73,400
ACCRUED PAYROLL 219,890
CURRENT PORTION OF MORTGAGE PAYABLE 500,000
Chapter 16 – Accounting for Health Care Organizations
16–26
Ch. 16, Solutions, Exercise 16-25, b. (Cont’d)
NET ASSETS:
WITHOUT DONOR RESTRICTIONS, UNDESIGNATED 2,287,620
WITHOUT DONOR RESTRICTIONS, DESIGNATED 254,227
WITH DONOR RESTRICTIONS 77,740 2,619,587
TOTAL LIABILITIES AND NET ASSETS $5,412,877
c. EDWARDS LAKE COMMUNITY HOSPITAL
STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 2023
REVENUE WITHOUT DONOR RESTRICTIONS:
NET PATIENT SERVICE REVENUE (NOTE 1) $1,980,900
OTHER OPERATING REVENUES 998,750
TOTAL REVENUES 2,979,650
EXPENSES:
OTHER PROFESSIONAL SERVICES EXPENSES 376,875
TOTAL EXPENSES 2,868,790
EXCESS OF REVENUES OVER EXPENSES 110,860
NONOPERATING GAINS (LOSSES)
INVESTMENT INCOME—WITHOUT DONOR RESTRICTIONS 8,530
Chapter 16 – Accounting for Health Care Organizations
16–27
Ch. 16, Solutions, Exercise 16-25 (Cont’d)
d. EDWARDS LAKE COMMUNITY HOSPITAL
STATEMENT OF CHANGES IN NET ASSETS
FOR YEAR ENDED DECEMBER 31, 2023
NET ASSETS WITHOUT DONOR RESTRICTIONS (see part 1 above):
EXCESS OF REVENUES AND GAINS OVER EXPENSES $ 119,390
INCREASE IN NET ASSETS WITHOUT DONOR
RESTRICTIONS 212,727
NET ASSETS WITH DONOR RESTRICTIONS:
NET ASSETS RELEASED FROM RESTRICTIONS (94,000)
NOTE 1: Net of contractual adjustments amounting to $1,520,000.
Chapter 16 – Accounting for Health Care Organizations
Ch. 16, Solutions, Exercise 16-25 (Cont’d)
e. EDWARDS LAKE COMMUNITY HOSPITAL
STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 2023
CASH FLOW FROM OPERATING ACTIVITIES:
CHANGE IN NET ASSETS $118,727
ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
INCREASE IN INVENTORY (2,100)
INCREASE IN ACCOUNTS PAYABLE 54,200
INCREASE IN ACCRUED PAYABLES 174,890
DEPRECIATION 245,500
UNREALIZED LOSS ON INVESTMENTS 663
NET CASH PROVIDED BY OPERATING ACTIVITIES 571,650
NET INCREASE IN CASH AND CASH EQUIVALENTS 71,650
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 276,440
CASH AND CASH EQUIVALENTS, END OF YEAR $348,090
General Problem Information: NFP hospital—journalize and financial statements
Learning Objective: 16-3
16–29
16-26.
The following is a list of modifications or corrections Danker Community Hospital should make
for its statement of operations to comply with FASB standards.
• Charity care is never recorded; therefore, it would not be recognized as an adjustment to
revenue over expenses.
• Similar to unrealized gains on equity investments, net assets released from restrictions is not
part of the performance indicator; therefore, it should be shown below a calculation for
• Note that Danker Community has opted to use the natural classification for expenses. In
accordance with FASB standards, it would be required to disclose the functional
classification amounts for program and support (management and general, and fund-raising).
• Note that Danker Community has opted to use a single step format rather than separate the
statement of operations into operating and nonoperating activity; this is an acceptable format
under the FASB standards.
General Problem Information: Not-for-profit statement of operations error analysis
Learning Objective: 16-2
Topic: Reporting and Accounting Issues