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, Southdale should record the donation of bandages as:

Question

Quizplus · Accepted Answer

The donation of bandages should be recorded as other operating revenue of $5,000, as it is a contribution of goods that can be used in the hospital's operations, thus increasing its operating revenue.

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