Question

Governmental Hospital. During 2017, the following selected events and transactions were recorded by Nichols County Hospital.

Gross charges for hospital services, all charged to accounts and notes receivable, were as follows:

Patient service revenues

$1,664,900

The hospital cafeteria and gift shop had cash sales of $295,300.

Additional information relating to current-year is as follows:

Contractual adjustments.	$632,000
Provision for bad debts	$30,200
Charity Care	$261,400

A federal cost reimbursement research grant of $350,000 was awarded. As of the end of the year, $200,000 in expenses related to the grant had been made. (Hint: See Chapter 4 for eligibility requirements.)

Vouchers totaling $1,326,540 were issued for the following items:

Fiscal and administrative services expenses	$194,440
General services expenses	$253,100
Nursing services expenses	$585,000
Other professional services expenses	$185,600
Inventory	$101,200
Expenses accrued at December 31, 2017	$7,200

Collections of accounts receivable totaled $1,159,000. Accounts written off as uncollectible amounted to $11,900.

Cash payments on vouchers payable (paid to employers and suppliers) during the year were $1,031,200.

During the year, the hospital received unrestricted cash contributions of $50,000 and unrestricted cash income from endowment investments of $6,500.

Supplies of $99,770 were issued to nursing services.

On December 31, 2017, accrued interest income on investments was $800.

Depreciation of buildings and equipment was as follows:

Buildings	$51,000
Equipment	$73,000

On December 31, 2017, closing entries were made in the general journal.

Using this information,

Show in general journal form the entries that should be made for each of the transactions and the closing entries in accordance with the standards for a governmental health care entity that follows proprietary fund accounting, as discussed in this chapter and Chapter 7.

Using the available information, calculate the net patient service revenue that would be reported on the statement of revenues, expenses, and changes in net position.

On December 31, 2017, accrued interest income on investments was $800.

Depreciation of buildings and equipment was as follows:

Buildings	$51,000
Equipment	$73,000

On December 31, 2017, closing entries were made in the general journal.

Using this information,

Show in general journal form the entries that should be made for each of the transactions and the closing entries in accordance with the standards for a governmental health care entity that follows proprietary fund accounting, as discussed in this chapter and Chapter 7.

Using the available information, calculate the net patient service revenue that would be reported on the statement of revenues, expenses, and changes in net position.

Answer 1

Journal entries:

                                                                                                                                         

Sl.no	Particulars	l.f	Debit Amount ($)	Credit Amount($)
1	Cash A/c………………………………………………………………………Dr		295300
	To Sales A/c			295300
	(Being cash sale of cafeteria and gift shop)
2	Profit and loss A/c …………………………………………………………..Dr		632000
	To contractual adjustments a/c			632000
3	Profit and loss A/c …………………………………………………………..Dr		30200
	To Provision for bad debts a/c			30200
4	Profit and loss A/c …………………………………………………………..Dr		261400
	To charity care a/c			261400
5	Grant a/c………………………………………………………………………..Dr		350,000
	To Profit and loss A/c			350,000
6	Profit and loss A/c …………………………………………………………..Dr		200,000
	To research expense a/c			200,000
7	Research expense a/c………………………………………………………Dr		200,000
	To grant a/c			200,000
8	Profit and loss A/c …………………………………………………………..Dr		194440
	To administrative services expense a/c			194440
9	Profit and loss A/c …………………………………………………………..Dr		253,100
	To general service expenses a/c			253,100
10	Profit and loss A/c …………………………………………………………..Dr		585,000
	To nursing service expense a/c			585,000
11	Profit and loss A/c …………………………………………………………..Dr		185,600
	To other professional services expense a/c			185,600
12	Profit and loss A/c …………………………………………………………..Dr		7,200
	To accrued expense a/c			7,200
13	Inventory a/c…………………………………………………………………..Dr		101,200
	To Profit and loss A/c			101,200
14	Accounts receivable a/c……………………………………………………Dr		1,664,900
	To sales a/c			1,664,900
15	Cash a/c…………………………………………………………………………….Dr		1,159,000
	Bad debts a/c…………………………………………………………………..Dr		11,900
	To accounts receivable a/c			1,170,900
16	Provision for bad debts a/c……………………………………………….Dr		11,900
	To bad debts a/c			11,900
17	Payment to suppliers a/c……………………………………………………Dr		1,031,200
	To cash a/c			1,031,200
18	Cash a/c……………………………………………………………………………Dr		56,500
	To endowment investments a/			56,500
19	Nursing services a/c………………………………………………………….Dr		99,770
	To inventory a/c			99,770
20	Investments a/c………………………………………………………………..Dr		8,000
	To accrued interest a/c			8,000
21	Profit and loss A/c …………………………………………………………..Dr		124,000
	To Depreciation on equipment a/c			73,000
	To Depreciation on building a/c			51,000

Statement showing net patient service revenue :

Sl.no	particulars	Amount($)	Amount($)
1	Patient service revenue	1,664,900
2	Cash sales	295,300
3	grant	350,000
4	contributions	56,500
5	Total revenue(1+2+3+4)		2,366,700
6	Research expense	200,000
7	Administrative expense	194,440
8	General service expense	253,100
9	Nursing service	585,000
10	Professional service exp	185,600
11	Prov for bad debts	30,200
12	Charity care	261,400
13	Contractual adjustments	632,000
14	Depreciation	124,000
15	Total expenses(6+7+8+9+10+11+12+13+14)		2,465,740
16	Net revenue (5-15)		(99040)