The Problems of Hospital Accounting

The Problems of Hospital Accounting
Typical hospital transactions are illustrated for Sierra Regional Hospital following the post-closing
trial balance as of September 30, 2015, the end of its fiscal year.
SIERRA REGIONAL HOSPITAL

(A Not-for-Profit Organization)
Post-Closing Trial Balance
As of September 30, 2015
Debits Credits
Cash $ 466.000
Short-term Investments $ 2.960.000
Accrued Interest Receivable $ 72.000
Accounts and Notes Receivable $ 600.000
Allowance for Uncollectible Receivables $ 172.000
Pledges Receivable $ 1.920.000
Allowance for Uncollectible Pledges $ - $ 146.000
Inventory $ 160.000
Prepaid Expenses $ 24.000
Assets Limited as to Use—Cash $ 13.000
Assets Limited as to Use—Investments $ 800.000
Long-term Investments $ 292.000
Land $ 2.160.000
Buildings $ 22.100.000
Equipment $ 9.840.000
Accumulated Depreciation—Buildings $ 2.100.000
Accumulated Depreciation—Equipment $ 2.520.000
Accounts Payable $ 220.000
Accrued Expenses Payable $ 32.000
Mortgages Payable $ 12.800.000
Net Assets—Unrestricted. Undesignated $ 17.280.000
Net Assets—Unrestricted. Designated $ 813.000
Net Assets—Temporarily Restricted—Plant $ 5.016.000
Net Assets—Permanently Restricted $ 308.000
$ 41.407.000 $ 41.407.000
1) Assume that total contributions were received in cash in the amount of $595,800 and
unrestricted endowment income was $16,200.
2) One piece of capital equipment, which had a historical cost of $56,000 and a book value of
$4,000 as of September 30, 2015, was sold early in the 2016 fiscal year for $1,000 cash.
3) New capital equipment costing $800,000 was purchased during FY 2016 by Sierra Regional
Hospital, $200,000 with temporarily restricted net assets and $600,000 with unrestricted net
assets.
4) During fiscal year 2016, the gross revenues for patient services from all responsibility centers
totaled $18,522,000. It is the practice of Sierra Regional Hospital to debit receivable accounts for
the gross charges for all services rendered to patients except for charity care patients.
5) For the FY 2016, it is assumed the estimated provision for bad debts is $360,000 and contractual
adjustments from third-party payors is $200,000.
6) Assuming a total of $97,600 was received in cash during FY 2016 from sources classified as other
revenue.
7) During the year, the following items were recorded as accounts payable: the $32,000 accrued
expenses payable as of September 30, 2015; nursing services expenses, $8,052,000; other
professional services expenses, $1,894,400; general services expenses, $3,300,000; fiscal and
administrative services expenses, $2,248,000; and supplies added to inventory, $800,000.
8) Collections on accounts and notes receivable during the year amounted to $17,684,000;
accounts and notes receivable totaling $262,000 were written off.
9) The following cash disbursements were made during FY 2016: accounts payable, $16,028,400; a
principal payment in the amount of $800,000 was made to reduce the mortgage liability; and
interest amounting to $320,000 on mortgages was paid.
10) The hospital received cash of $56,000 for interest on investments held in the Assets Limited as
to Use—Investments account.
11) The $56,000 received in cash for interest was reinvested in investments to be held for eventual
use for expansion of facilities; the hospital governing board decided to purchase an additional
$700,000 of investments for the same purpose. Entries reflect the purchase of the investments
and the increase in unrestricted dsignated net assets.
12) Cash was received during FY 2016 from the following sources: interest on marketable securities
(including the amount accrued at the end of the 2015 fiscal year), $138,000; and collections of
pledges receivable, $584,000.
13) Supplies issued during the year cost $640,000 ($40,000 of the total was for use by fiscal and
administrative services; $240,000 for use by general services; and the remainder for use by
other professional services)
14) Accrued expenses as of September 30, 2016, included $320,000 interest on mortgages; fiscal
and administrative services expenses, $17,400; and other professional services expenses,
$9,600. Prepaid expenses, consisting of general services expense items, declined $8,000 during
the year.
15) Depreciation of plant and equipment for FY 2016 was in the amounts shown in the following
Marketable securities carried in the accounts at $170,000 were sold for $118,000. The proceeds
were reinvested in marketable securities, and $600,000 additional marketable securities were
purchased from cash received during the year. The $26,000 loss on sale of investments reduces
the amount available for acquisition of plant and will be closed at year-end to Net Assets—
Temporarily Restricted—Plant.
16) A review of pledges receivable indicated pledges restricted for plant acquisition in the amount of
$50,000 should be written off, and the allowance for uncollectible pledges should be increased
by $132,600.
17) The fair values of short-term investments and assets limited as to use have not changed during
the year. At the end of FY 2016, the amount of interest accrued on marketable securities is
$88,000. This amount is temporarily restricted for plant acquisition.
18) Sierra Regional Hospital did not have any net assets temporarily restricted for programs as of
September 30, 2015. In September 2016, however, a civic organization donated $10,000 to the
hospital to be used to augment the physician residency program. The organization pledged an
additional sum of $40,000 to be paid in the coming year for the same purpose.
19) During FY 2016, the hospital received marketable securities with a market value of $48,000 at
the date of the gift. The securities are to be held for the production of income; the income from
these securities is for unrestricted use.
20) Natural expenses of depreciation, interest, and provision for bad debts were allocated to the
functional expenses based on an allocation basis established by the hospital.
o Nursing Services Expenses 1,283,000
o Other Professional Services Expenses 359,240
o General Services Expenses 564,520
o Fiscal and Administrative Services Expenses 359,240
o Provision for Bad Debts 360,000
o Depreciation Expense 1,566,000
o Interest Expense 640,000
Required :
1) General Journal :
Date CoA Account Title Dr Cr
2) Posting to General Ledger :

Date CoA Account Title Dr Cr Balance
3) Trail Balance :
CoA Account Title Dr Cr
4) Financial Statement at September 30, 2016 :

a) Financial Position Statement
b) Activity Statement
c) Net Assets Statement
d) Cash Flow Statement

The Problems of Hospital Accounting

Uploaded by

Copyright:

Available Formats

The Problems of Hospital Accounting

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Problems of Hospital Accounting

Uploaded by

Copyright:

Available Formats

The Problems of Hospital Accounting

SIERRA REGIONAL HOSPITAL

2) Posting to General Ledger :

4) Financial Statement at September 30, 2016 :

You might also like