Deck 6: The Balance Sheet

Question 1

The checking account of a small healthcare business pays interest each day the balance in the account exceeds $1,000. The bank credits the account with the accumulated interest at the end of each month. How should the interest income be posted?

A) As a credit to Cash and a debit to Interest Income
B) As a credit to Interest Income and a debit to Cash
C) As a credit to Miscellaneous Income
D) As a credit to Short-Term Investments

Answer 1

As a credit to Interest Income and a debit to Cash

Question 2

In 1972, land was purchased for $110,000 and an office building constructed for $500,000. The building was assigned a useful life of 27.5 years and a salvage value of zero. In 2012, the property was sold for $150,000, with $110,000 assigned to land value and $40,000 for the value of the building. How should the sale of the building be posted to the books?

A) $40,000 to Long-Term Investments
B) $40,000 to Miscellaneous Revenue
C) $150,000 to Cash
D) $8,000 to Miscellaneous Revenue for each of the past 5 years ($40,000 total)

Answer 2

$40,000 to Miscellaneous Revenue

Question 3

The ratio of (cash + short term investments + accounts receivable) to current liabilities is the ____.

A) current ratio
B) quick ratio
C) slow ratio
D) solvency ratio

Answer 3

quick ratio

Question 4

A business can choose any starting point for its fiscal year.

Question 5

The book value of a dental practice is $400,000. The dental practice was purchased for $480,000. The additional $80,000 is recorded on the books as ____.

A) an intangible asset
B) investment income
C) accumulated appreciation
D) goodwill

Question 6

A healthcare business has a current ratio of 1.5, a quick ratio of 1.3, and a debt to net worth ratio of 2.0. Such a business is most likely to have difficulty with ____.

A) current liabilities
B) short-term profits
C) long-term debt
D) a forensic audit

Question 7

Accounts Receivable for a physician's office contains ____.

A) accumulated charges for services performed
B) expected payments for services performed
C) a list of patients who were seen by the physician during the fiscal year
D) accumulated cash payments made at the time of service

Question 8

Accrued liabilities are the total of all liabilities in the current fiscal year.

Question 9

A medical office has many patients covered by WeCare, a preferred provider health insurance company. A Level 1 office visit has a standard charge of $80. WeCare pays $50. The past history shows that WeCare denies 5% of claims for Level 1 office visits. There were 100 Level 1 office visits by WeCare patients in the past month. Assuming the same past history, what will the totals be for Accounts Receivable and Less: Allowance for Uncollectible Payments?

A) $5,000 and $250
B) $8,000 and $400
C) $5,000 and $400
D) $8,000 and $250

Question 10

Liabilities are divided into ____.

A) current and non-current
B) short-term and accruable
C) tangible and intangible
D) short-term and long-term

Question 11

Which of the following would be considered a current asset?

A) money in a checking account
B) accounts payable
C) real estate
D) computer software

Question 12

Deferred revenues are a type of ____.

A) current assets
B) current liabilities
C) non-current assets
D) non-current liabilities

Question 13

The current ratio and quick ratio assess ____.

A) liquidity
B) solvency
C) stability
D) future earnings

Question 14

The net worth of a company in business since 2000 will be its revenues minus its expenditures for the current fiscal year.

Question 15

Salvage value refers to the money saved by purchasing used equipment instead of new.

Question 16

A for-profit healthcare business expects to make a large profit in the next year because it has completed its payments on a mortgage. To lower its taxes in its next fiscal year, it buys expensive equipment and ____.

A) uses standard depreciation methods
B) uses accelerated depreciation
C) uses an asset carryover strategy
D) takes out a loan with a 10-year repayment plan

Question 17

A business uses the calendar year for its fiscal year. On March 10th, it buys six months of liability insurance that will go into effect on April 1st. This should be listed in the books as a prepaid expense.

Question 18

A healthcare facility buys a SuperScanner for $60,000. It has a six-year life expectancy and an estimated salvage value of $10,000. The accountant recommends a straight-line depreciation method. What is the annual charge for depreciation of the SuperScanner?

A) $10,000
B) $9,000
C) $8,333.33
D) It varies by year.

Question 19

A chiropractor facility sells a custom-blended herbal product to its patients for $20 a bottle. At the end of its fiscal year it has 50 bottles. How should this be entered in the balance sheet?

A) It should not be entered based on the materiality principle.
B) $1,000 of supplies
C) $1,000 of inventory
D) $1,000 of prepaid expenses

Question 20

The net worth of a government-owned healthcare facility is referred to in accounting as ____.

A) owner's equity
B) stockholder's equity
C) net assets
D) fund balance

Question 21

A radiologist plans to retire in the next two to five years. He buys a new $20,000 X-ray machine that is expected to last ten years. His accountant recommends a depreciation method that reduces the value by 30% each year ($20,000 to $14,000 to $9,800 to $6,860, etc.). Why would this be recommended instead of a simple $2,000 per year depreciation?

Question 22

Dr. John Dough, P. C., bought two acres of land in 1980 for $20,000 and paid $180,000 for construction of a medical office. Local realtors estimate that the land is now worth $100,000. The value for the land should be listed on the balance sheet as $____________________.

Question 23

Explain the difference between accounts payable and accrued liabilities.

Question 24

Assets and liabilities are classified as current or non-current. Why is the cutoff for such classifications one year? Why not six months or three years?

Question 25

What are the advantages and disadvantages to a medical practice of keeping a minimum amount of supplies on hand?

Question 26

A business owns a municipal bond with a maturity date two years in the future. On a balance sheet, the bond should be classified as a(n) ____________________.

Question 27

An accounting category such as Less: Allowances for Uncollectible Payments is called a(n) ____________________.

Question 28

The solvency ratio of a for-profit hospital decreased for six consecutive years and then went up. What are possible explanations for the increased ratio?

Question 29

A medical practice borrowed money that is being repaid over an eight year period. The principal to be paid during the current fiscal year is categorized as _____________________ - long term debt.

Question 30

A physical therapist forms a personal corporation and borrows $20,000 to open a small treatment center. The bank loan is structured so that it will be repaid in ten years, but no payments are due for the first 18 months. In this fiscal year, the $20,000 be listed as ____________________ of current portion.