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In: Accounting

Question 1 Whitt Valley Presbyterian Hospital is a nonprofit initial care facility. For the hospital’s calendar...


Question 1

Whitt Valley Presbyterian Hospital is a nonprofit initial care facility. For the hospital’s calendar year ending December 31, 2019, prepare (I) journal entries to record the transactions listed in a. through n. below, (II) a trial balance based on your entries and the beginning balances listed at o. below, and (III) a Statement of Operations and a Statement of Changes in Net Assets for the hospital.

  1. Third-parties payers and direct-pay patients were billed $6,500,000 at the hospital's established billing rates
  2. The hospital determined that certain of its patients qualified for charity care and that it would not seek to collect $950,000 at established billing rates from direct-pay patients
  3. The hospital estimated contractual adjustments for the year of $1,600,000
  4. The hospital originally estimated uncollectible amounts from direct-pay patients to be $250,000 (recall that original estimated uncollectible amounts reduce revenue; only estimates specific to an individual patient are reported as bad debt expense).
  5. The hospital received capitation premiums of $2,500,000. It estimated that the cost of providing this care was $1,800,000
  6. The hospital received payments from third-party payers and direct-pay patients totaling $3,500,000
  7. The hospital received contributions of $1,100,000 that were restricted by donors for building a new urgent care wing
  8. The hospital paid salaries and wages of $4,500,000 in cash; these amounts are reported as patient care expense
  9. The fair value of investments required to be held in perpetuity increased by $25,000
  10. The hospital received cash from interest and dividend income of $10,000 on investments without donor restrictions
  11. The hospital used $1,375,000 of net assets with donor restrictions to construct a new urgent care wing, consistent with the restrictions created by the donors
  12. The hospital reported depreciation expense of $475,000
  13. The hospital used drug inventories of $365,000
  14. The hospital incurred other operating costs for patient care of $275,000 on credit
  15. The hospital’s beginning of the year trial balance at January 1, 2019 was as follows:

Whitt Valley Presbyterian Hospital
Trial Balance
As of January 1, 2019

Without Donor Restrictions

With Donor Restrictions

Debit

Credit

Debit

Credit

Cash

$1,485,000

$401,600

Investments

153,000

40,000

Patient accounts receivable

250,000

Inventory—drugs

401,000

Property, plant, and equipment

4,400,000

Accumulated depreciation

$600,000

Accounts payable

21,000

Net assets, January 1, 2019

                 -

6,068,000

              -

$441,600

$6,689,000

$6,689,000

$441,600

$441,600

Solutions

Expert Solution

Journal entries in the books of Whitt Valley Presbyterian Hospital for the year ending 31st Dec, 2019

(in $)

S.No

Particulars

Debit

Credit

1

Cash A/c Dr

To Sales A/c

6,500,000

6,500,000

2

Charity A/c dr

To cash a/c

(forgone cash, being patients eligible from Charity)

950,000

950,000

3

Provision for contractual adjustments A/c dr

To Profit and loss A/c

1,600,000

1,600,000

4

Bad Debts expense a/c dr

Allowance for doubtful a/c

250,000

250,000

5

Cash A/c dr

To Capitation premium a/c dr

2,500,000

2,500,000.

6

Implementation charges a/c dr

To Cash a/c

1,800,000

1,800,000

7

Cash A/c Dr

To Sales A/c

3,500,000

3,500,000

8

Cash A/c dr

To renovation a/c

1,100,000

1,100,000

9

Salaries and wages a/c dr

To cash a/c

4,500,000

4,500,000

10

Investments A/c Dr

To cash a/c

25,000

25,000

11

Dividend A/c dr

To cash a/c

10,000

10,000

12

Renovation a/c dr

To cash a/c

1,375,000

1,375,000

13

Depreciation a/c dr

To respective asset a/c

475,000

475,000

14

Inventory a/c dr

To accounts payable

365,000

365,000

15

Operating expense a/c dr

To cash a/c

275,000

275,000


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