Question 1

A specialized health care facility normally purchases its medicines.However, this month a wealthy philanthropist donates the medicines.The donated medicines should be recorded at fair market value and should be credited to:

Accepted Answer

The answer of A specialized health care facility normally purchases...

Question 2

In prior years, a not-for-profit hospital received funds from a donor who restricted the use of those funds to providing nursing scholarships.During the current year $8,000 of scholarships were awarded.These scholarships should be reported

Accepted Answer

The answer of In prior years, a not-for-profit hospital received...

Question 3

During the current year, St.Louise's Hospital (a not-for-profit entity)earned, based on its normal billing rate, $1 million in patient service revenues.Many of these patients belong to a health plan that has an established pay schedule.Based on the specific services rendered to members of the plan, the hospital estimates that $0.05 million will not be collectible from the plan or the patient.Some of the patients are hospital employees.These employees are given a 50 percent discount on the services rendered.Employee discounts for the current year total $0.01 million.Some of the patients are uninsured and the hospital estimates that, of the amount billed to the uninsured patients, $0.2 million will not be collectible (bad debts).The amount of net patient service revenues for St.Louise's Hospital for the current year is

Accepted Answer

The net patient service revenues can be calculated as follows:

Total patient service revenues = $1 million
Less: Estimated uncollectible amount from health plan and patients = $0.05 million
Net patient service revenues before employee discounts and bad debts = $0.95 million
Less: Employee discounts = $0.01 million
Net patient service revenues before bad debts = $0.94 million
Less: Estimated bad debts from uninsured patients = $0.2 million
Net patient service revenues = $0.74 million

Therefore, the correct answer is option B.

Question 4

A not-for-profit hospital signs a contract with an insurance company in which the company agrees to pay the hospital $9 million in capitation fees for the year July 1, 2017, through June 30, 2018.Between July 1, 2017 and December 31, 2017, the hospital provides services that, at its standard rates, would bill at $5.1 million.Between January 1, 2017, and June 30, 2018, it provides services that it would bill at $4.2 million.For the year ending December 31, 2017, the hospital should recognize capitation revenue of

Accepted Answer

Capitation revenue should be recognized proportionally over the contract period based on the services provided. The hospital provided services worth $5.1 million in the first half of the year, which is 6/12 or 50% of the contract period. Therefore, it should recognize 50% of the total capitation fees, which is $4.5 million, as revenue for the year ending December 31, 2017.

Question 5

The LRF Healthcare Foundation donated 1,800,000 as a permanent endowment to a senior citizen health and welfare organization during the year.The foundation stipulated that the income and investment appreciation be used to maintain its preventive care center for the elderly.The endowment principal had an investment appreciation of $120,000 and investment income of $160,000.The organization spent $140,000 to maintain its preventive care center during the year.What is the amount of change in temporarily restricted net assets that the organization should report?

Accepted Answer

The answer of The LRF Healthcare Foundation donated 1,800,000 as...

Question 6

Based upon St.Thomas Hospital's established billing rate structure, the hospital would have earned patient service revenue of $5,100,000 for the year.However, the hospital does not expect to collect this amount because of charity care provided in the amount of $600,000 and contractual allowances to third-party payers of $450,000.How much should the hospital record as patient service revenue for the year?

Accepted Answer

The answer of Based upon St.Thomas Hospital's established billing rate...

Question 7

Daniel, an auditor, is performing a routine review of a not-for-profit hospital and notes the following account balances in the statement of activities for the fiscal year ending September 30, 2017:  What amount should the hospital report as net patient service revenue in its statement of activities for the fiscal year ending September 30, 2017?

Accepted Answer

The answer of Daniel, an auditor, is performing a routine...

Question 8

During the current year, a voluntary health and welfare organization receives $800,000 in unrestricted pledges.Of this amount, $300,000 has been designated by donors for use next year to support operations in the pharmacy.If 20 percent of the unrestricted pledges are expected to be uncollectible, what amount of unrestricted support should the organizations recognize in its current-year financial statements?

Accepted Answer

The answer of During the current year, a voluntary health...

Question 9

An accountant has encountered a perplexing financial reporting issue related to the hospital for which she is preparing financial statements.The issue is not specifically addressed by FASB statements.To which of the following sources would the accountant probably look first for industry-specific guidance?

Accepted Answer

The accountant would look first to the AICPA accounting and auditing guide specific to the industry, which in this case would be the AICPA accounting and auditing guide for Health Care Organizations. This guide provides industry-specific guidance on financial reporting for healthcare organizations. The GASB statements are geared toward government entities and may not be relevant to the hospital. The pronouncements of the HFMA or AHA may be helpful, but the AICPA guide for healthcare organizations would be a more comprehensive source of guidance.

Question 10

A hospital estimates that, based on past experience, it will incur $5 million in malpractice claims as a result of services rendered in the current period.The hospital carries a malpractice insurance policy with a yearly $2 million deductible clause.The amount that should appear on its year-end financial statement as Claims Expense (Loss)should be

Accepted Answer

The hospital estimates that it will incur $5 million in malpractice claims, however, since they have a deductible clause of $2 million, they will only be responsible for the remaining $3 million. Therefore, the amount that should appear on its year-end financial statement as Claims Expense (Loss) is $3 million.

Question 11

In the process of general purpose external financial reporting, a health care organization is required to present

Accepted Answer

In the process of general purpose external financial reporting, a health care organization is required to present a statement of activities or operations, which summarizes the entity's revenues and expenses during a given period. While a separate statement of changes in equity, net assets, or fund balances may be required for some organizations, it is not a universal requirement for all health care entities. Performance indicators and fund group information are not typically required in general purpose external financial reporting.

Question 12

In accounting for health care organizations, restricted net assets are:

Accepted Answer

Restricted net assets are those that have been donated or granted with specific restrictions on their use, such as for a specific program or project. These funds can only be used for the purposes designated by the donor or grantor and are not available for general operating use by the organization. Thus, option D is the correct choice.

Question 13

Sponsors of not-for-profit health care organizations generally include:

Accepted Answer

Not-for-profit health care organizations can receive sponsorships from various sources, including universities, community organizations, and religious organizations. Therefore, the best choice is D, which includes all of the above options.

Question 14

Hospital revenue usually includes which of the following?

Accepted Answer

The answer of Hospital revenue usually includes which of the...

Question 15

The Medical Arts Clinic, a well-established health care organization, received a $1,500,000 pledge in fiscal year 2018 that was restricted to cover operating expenses.The gift was received over two years; $600,000 in the first year and $900,000 in the second year.The following table reflects the funds received as well as the amounts spent on operating the clinic.  What should the clinic report as Net Assets Released from Restrictions on the statement of activities for the fiscal year ended June 30, 2019?

Accepted Answer

The answer of The Medical Arts Clinic, a well-established health...

Question 16

The community hospital of Briarwood normally includes proceeds from sales of meals in its cafeteria as

Accepted Answer

The revenue from the sales of meals in the hospital's cafeteria does not directly relate to patient care, so it would not fall under patient service revenues (D) or ancillary service revenues (A). Depending on how the hospital accounts for its expenses, it may or may not be deducted from dietary meal service expenses (C), but it would still be considered a revenue source, therefore the best choice is "Other revenues" (B).

Question 17

Which of the following would normally be considered ongoing or central transactions for a not-for-profit hospital?

Accepted Answer

Both recovery room fees for surgical patients and room and board fees from patients would be considered ongoing or central transactions for a not-for-profit hospital as they represent major sources of revenue for the hospital's operations.

Question 18

The Gulf Coast bank is holding a $750,000 donation in an independent permanent trust with the investment income dedicated for use by Coastal Hospital for operating purposes. The $750,000 principal should be:

Accepted Answer

The answer of The Gulf Coast bank is holding a...

Question 19

A hospital carried a 2-year malpractice insurance policy that allows for retroactive premium adjustments based on experience (claims actually incurred).The basic premium is $300,000, payable in advance.At the end of the first year the hospital estimates that it will have to pay an additional $80,000 in premiums as a result of claims filed in the current year and it estimates that it will incur additional premiums in the second year of $100,000 as a result of claims filed in the second year.The amount of insurance expense that should appear on the financial statements at the end of the first year should be

Accepted Answer

The hospital paid the basic premium of $300,000 in advance. However, based on the estimated additional premiums of $80,000 and $100,000 for the current year and the second year, respectively, the total insurance expense should be $380,000 ($300,000 + $80,000) at the end of the first year. Therefore, the hospital should adjust its financial statements to reflect this additional expense, resulting in a total of $230,000 ($380,000 - $150,000, the amount already expensed) as the insurance expense for the first year.

Question 20

A consortium of physicians agrees to provide services to the employees of a large county government.The agreement calls for monthly payments from the county to the consortium in the amount of $200,000 per month.County employees are not billed for services rendered by the consortium.All county employees are required to use the consortium under their health care program (any services rendered to county employees by other physicians are not covered under the health plan).During the month the consortium performed services for county employees for which it would have billed $170,000.The consortium referred patients to other health care providers for services they could not perform.The consortium estimates that patients will be billed $10,000 for those services.The amount of revenue that should be recognized for the month by the consortium is

Accepted Answer

The correct amount of revenue to be recognized by the consortium for the month is $200,000. This is because the agreement specifies a fixed monthly payment of $200,000 from the county to the consortium, regardless of the actual value of services rendered or referred to other providers.

Quiz 14: Health Care Providers