Under Southdale Hospital's established rate structure, the hospital would have earned patient service revenue of $7,000,000 for the year ended December 31, 2017. However, Southdale did not expect to collect this amount because of charity allowances of $1,000,000 and discounts of $500,000 to third party payers. In May 2017, Southdale purchased bandages from Ace Supply Co. at a cost of $5,000. However, Ace notified Southdale that the invoice was being cancelled and that the bandages were being donated to Southdale. For the year ended December 31, 2017, how much should Southdale record as patient service revenue?

Question

Quizplus · Accepted Answer

Patient service revenue is recorded at the established rate before deductions for charity allowances and discounts to third-party payers. The donation of bandages does not affect patient service revenue.

Under Southdale Hospital's Established Rate Structure, the Hospital Would Have