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

Question

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The hospital is responsible for the deductible amount of $2 million, and the remaining $3 million is the estimated claims expense that should be recorded as a loss.

A Hospital Estimates That, Based on Past Experience, It Will