Question 1

The AICPA Audit and Accounting Guide: Health Care Organizations applies to:

Accepted Answer

The AICPA Audit and Accounting Guide: Health Care Organizations applies to all health care organizations, regardless of their ownership structure. It includes guidance for private not-for-profit, governmentally owned, and investor-owned health care organizations.

Question 2

Private not-for-profit health care organizations include what categories in the equity section of the Statement of Net Assets?

Accepted Answer

Private not-for-profit health care organizations typically have three categories in the equity section of the Statement of Net Assets: unrestricted, temporarily restricted, and permanently restricted. This reflects the various types of funds that the organization has available for use in its operations, and the restrictions on those funds that may be in place due to donor or other requirements. Paid in capital and retained earnings are more commonly associated with for-profit organizations, while the categories of invested in capital net of related debt, restricted, and unrestricted are not typically used in the equity section of the Statement of Net Assets. Operating, investing, and financing are categories used in the statement of cash flows, not in the equity section of the Statement of Net Assets.

Question 3

The equity section of the Statement of Net Assets of a private not-for-profit hospital may contain which of the following descriptions?

Accepted Answer

The equity section of the Statement of Net Assets in a private not-for-profit hospital typically includes the categories of Permanently Restricted, Temporarily Restricted, and Unrestricted. These categories represent funds that are restricted by donors or by the hospital for specific purposes, as well as funds that are unrestricted and available for general use by the hospital.

Question 4

A private not-for-profit entity estimated its Allowance for Contractual Adjustment.During the next year,the hospital found that the actual total of contractual adjustments applied to receivables on hand at the end of the previous year was $5,000 higher than the estimate.How should the difference be reported?

Accepted Answer

The hospital should reduce current period net patient service revenues for the $5,000 because the difference between estimated and actual contractual adjustments affects the revenue recognition for the current period.

Question 5

Which of the following is a required statement for a governmental hospital?

Accepted Answer

Governmental hospitals are required to prepare a Statement of Cash Flows as part of their financial reporting.

Question 6

Which of the following could be recognized as contributed services revenue by a not-for-profit hospital?

Accepted Answer

Contributed services revenue can include professional services, such as those provided by an architect in developing building plans. Volunteer services, such as those provided by the high school students answering phones, would not be recognized as revenue.

Question 7

Sam Smith died,leaving a will that provided that $1,000,000 be transferred to a not-for-profit hospital.The hospital is to invest the funds for 10 years and give $40,000 each year to the granddaughter.At the end of the 10 years,the $1,000,000 can be used for any purpose desired by the hospital.Which of the following is true?

Accepted Answer

The answer of Sam Smith died,leaving a will that provided...

Question 8

Which of the following is not true regarding accounting and financial reporting for private not-for-profit hospitals?

Accepted Answer

Expenses in private not-for-profit hospitals are generally reported as unrestricted, not temporarily restricted, regardless of donor intent.

Question 9

The difference between the financial statements of private not-for profit hospitals and private not-for-profit voluntary health and welfare organizations is:

Accepted Answer

The answer of The difference between the financial statements of...

Question 10

Which of the following is true regarding accounting and financial reporting for not-for-profit health care organizations?

Accepted Answer

Charity care is not reported as operating revenue in not-for-profit health care organizations. It is reported as an expense since it represents the cost of the services provided for free or at a reduced cost. Contractual adjustments with insurance companies are also not reported as an operating expense, but as a deduction from gross patient revenue to arrive at net patient revenue.

Question 11

Private health care organizations follow _____ standards while governmentally owned health care organizations follow _____ standards.

Accepted Answer

Private health care organizations follow Financial Accounting Standards Board (FASB) standards while governmentally owned health care organizations follow Governmental Accounting Standards Board (GASB) standards. FASB sets accounting standards for private sector organizations while GASB sets accounting standards for state and local government entities.

Question 12

The AICPA Health Care Guide provides reporting requirements for all of the following organizations except:

Accepted Answer

The AICPA Health Care Guide provides reporting requirements for all types of health care organizations, including government-owned hospitals, limited liability corporations, and religious organizations operating nursing homes. Therefore, all of the above organizations must follow the guide.

Question 13

The difference between accounting for private not-for profit hospitals and government owned hospitals is:

Accepted Answer

Public and private sector health care organizations measure transactions and events similarly, but use different equity accounts, reflecting the varying ownership categories.

Question 14

A donor contributed $1,000,000 to a not-for-profit hospital with the restriction that the funds be invested indefinitely and the income be used for cancer research.Which of the following would be true?

Accepted Answer

The gift is restricted for cancer research and therefore would be recorded as an increase in permanently restricted net assets. The income earned from the invested funds would be restricted to support cancer research and not available for unrestricted use, thus it would not be recorded as an increase in unrestricted net assets.

Question 15

Which of the following is false regarding revenues of health care organizations?

Accepted Answer

Patient service revenue does not include charges for charity care. Charity care is reported separately as a deduction from patient service revenue.

Question 16

The equity section of the Statement of Net Assets of a government-owned hospital may contain which of the following descriptions?

Accepted Answer

Government-owned hospitals typically report their equity in terms of Invested in Capital Assets Net of Related Debt, Restricted, and Unrestricted. This reflects the amount of resources that are invested in capital assets, any restrictions on those assets, and any remaining funds that are unrestricted and available for use. The other options listed do not typically apply to government-owned hospitals.

Question 17

Which of the following is true regarding accounting and financial reporting for not-for-profit health care organizations?

Accepted Answer

Both statements are true regarding accounting and financial reporting for not-for-profit health care organizations. Unrealized gains and losses on other than trading securities must be reported below the performance indicator, and expenses must be reported by function in the Statement of Operations or disclosed in the notes.

Question 18

A donor pledged $500,000 to a not-for-profit hospital in 2011 to conduct medical research,conditional on the hospital raising $500,000 from other donors.The other donors met the condition in 2012.The donor transferred the funds to the hospital in 2012.In which year would the revenue be recognized?

Accepted Answer

Revenue recognition would occur in 2012 when the other donors met the condition and the $500,000 was transferred to the hospital. The donor's pledge in 2011 would not be recognized until the condition was met and the funds were received in 2012.

Question 19

A hospital reported the following uncollectible amounts:
$20,000 for services rendered to homeless individuals with no intention of collection.
$30,000 for services rendered with the expectation of collection,but proved to be uncollectible.
What amount should be reported in revenues and bad debt expense for these items?

Accepted Answer

The $30,000 was initially expected to be collected, so it should be included in revenues and then written off as bad debt expense. The $20,000 was never expected to be collected, so it is not included in revenues or bad debt expense.

Question 20

Which of the following is true regarding revenue recognition for health care organizations?

Accepted Answer

Patient service revenue is presented net of contractual adjustments. Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations. Other revenues on the Statement of Operations include revenues from activities such as parking lot, gift shop, cafeteria and tuition.

Quiz 12: Accounting for Hospitals and Other Health Care Providers

The AICPA Audit and Accounting Guide: Health Care Organizations applies to:

Private not-for-profit health care organizations include what categories in the equity section of the Statement of Net Assets?

The equity section of the Statement of Net Assets of a private not-for-profit hospital may contain which of the following descriptions?

Which of the following is a required statement for a governmental hospital?

Which of the following could be recognized as contributed services revenue by a not-for-profit hospital?

Which of the following is not true regarding accounting and financial reporting for private not-for-profit hospitals?

The difference between the financial statements of private not-for profit hospitals and private not-for-profit voluntary health and welfare organizations is:

Which of the following is true regarding accounting and financial reporting for not-for-profit health care organizations?

Private health care organizations follow _ standards while governmentally owned health care organizations follow _ standards.

The AICPA Health Care Guide provides reporting requirements for all of the following organizations except:

The difference between accounting for private not-for profit hospitals and government owned hospitals is:

A donor contributed $1,000,000 to a not-for-profit hospital with the restriction that the funds be invested indefinitely and the income be used for cancer research.Which of the following would be true?

Which of the following is false regarding revenues of health care organizations?

The equity section of the Statement of Net Assets of a government-owned hospital may contain which of the following descriptions?

Which of the following is true regarding accounting and financial reporting for not-for-profit health care organizations?

A donor pledged $500,000 to a not-for-profit hospital in 2011 to conduct medical research,conditional on the hospital raising $500,000 from other donors.The other donors met the condition in 2012.The donor transferred the funds to the hospital in 2012.In which year would the revenue be recognized?

Which of the following is true regarding revenue recognition for health care organizations?