Question

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

Answer 1

Journal entries in the books of Whitt Valley Presbyterian Hospital for the year ending 31^st 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