Question 1

A not-for-profit hospital will prepare a statement of operations pertaining to the hospital's $\begin{array}{rrr}&\text { unrestricted } & \text { restricted } \
&\text { net assets } & \text { net assets } \
\hline
\text { a. } & \text { yes } & \text { yes } \
\text { b. } & \text { no } & \text { no } \
\text { c. } & \text { no } & \text { yes } \
\text { d. } & \text { yes } & \text { no }
\end{array}$

Accepted Answer

The answer of A not-for-profit hospital will prepare a statement...

Question 2

The accounting and financial reporting procedures for which fund category apply to governmental hospitals?

Accepted Answer

Governmental hospitals typically operate like businesses, generating revenue and incurring expenses to provide healthcare services. As such, their financial activities are best accounted for using proprietary type funds, which are used for businesses-like activities and are reported using accrual accounting. Governmental type funds are used for general government operations, fiduciary type funds are used to hold resources in trust for others, and restricted type funds are used for specific purposes with limitations on how the funds are used.

Question 3

A governmental hospital receives notice of a $100,000 grant from the federal government to conduct breast cancer research.The grant contains an eligibility requirement;that is,the hospital must incur costs and submit quarterly reports of allowable costs incurred.The reports are subject to audit.When should the hospital recognize revenues under the grant?

Accepted Answer

The hospital should recognize revenues under the grant as it incurs allowable costs. This is because the eligibility requirement of the grant states that the hospital must incur costs and submit quarterly reports of allowable costs incurred. Therefore, the revenue recognition should correspond to the expenses incurred in relation to the grant.

Question 4

A not-for-profit hospital receives a $150,000 donation that must be used for a specific research project.The hospital anticipates that it will undertake the project next year.How should the hospital report the donation?

Accepted Answer

The donation is designated for a specific research project, so it should be reported as temporarily restricted support until the project is undertaken. Once the project is completed, any remaining funds could be released from the restriction and reported as unrestricted support.

Question 5

A not-for-profit hospital receives a $25,000 donation that must be used for a special training program for nurses.When the donated resources are used for the intended purpose,in which net asset classification should the hospital report the expense?

Accepted Answer

The answer of A not-for-profit hospital receives a $25,000 donation...

Question 6

A not-for-profit hospital's trustees designate $600,000 of the hospital's unrestricted resources for the future acquisition of equipment.The trustees tell the hospital comptroller to purchase a separate certificate of deposit for it.How should the hospital record and report this investment?

Accepted Answer

The correct answer is to report the investment as "assets limited as to use," and report $600,000 of net assets as unrestricted net assets. This is because the trustees' designation of funds for a specific purpose does not legally restrict the funds, so they remain unrestricted but are earmarked for a specific use.

Question 7

In the statement of operations of a not-for-profit hospital,which of the following increases in net assets is not likely to appear as part of Excess of revenues over expenses?

Accepted Answer

Net assets released from restrictions used for the purchase of equipment are typically reported separately from the excess of revenues over expenses in the statement of operations of a not-for-profit hospital. This is because these funds are restricted for specific purposes and their use does not reflect the hospital's ongoing operational performance.

Question 8

(Distinguishing among the three net asset classifications)
Assume that Andy Kelly Hospital (Problem 44)is a not-for-profit hospital.For each of the six transactions or events shown in that problem,state which of the three net asset classifications are affected: unrestricted;temporarily restricted;or permanently restricted.

Accepted Answer

The answer of (Distinguishing among the three net asset classifications)
Assume...

Question 9

(Accounting for donations and donor-restricted and board-designated resources)
A not-for-profit hospital uses the following funds to account internally for its resources: General Fund (GF);Specific Purpose Funds (SPF);Plant Replacement and Expansion Funds (PREF);and Endowment Funds (EF).The hospital is establishing a special trauma unit for brain-related injuries,and is soliciting contributions for this purpose.It reports donations as revenues,rather than gains,because fund-raising is a significant part of its ongoing activities.Record the following transactions,stating the fund or funds used,and whether unrestricted,temporarily restricted,or permanently restricted net assets are affected.
a.Hospital trustees set aside $100,000 for the purpose of training its nurses to deal with patients in the hospital's trauma unit.
b.National Products donated trauma equipment having a fair value of $325,000.Also,Stay-Cool Chemical donated drugs having a fair value of $44,000.
c.The hospital received cash contributions from local donors,who stipulated that the donations must be used for the following purposes involving the trauma unit:
(1)$10,000,to help pay the salary of Dr.Harlan Elliot,noted brain surgeon;and
(2)$200,000,to be used solely for the purpose of equipping the trauma unit.
d.Dr.Cheryl Fusco was hired.His first month's salary was $25,000.The hospital used the donation received in transaction c(1)to pay part of Dr.Fusco's salary.
e.The hospital purchased $80,000 of special equipment for the trauma unit.Its policy is to use donated funds to acquire equipment before it uses internally-generated funds.

Accepted Answer

The answer of (Accounting for donations and donor-restricted and board-designated...

Question 10

When a hospital uses funds for internal record-keeping purposes,Specific Purpose Funds are those that are:

Accepted Answer

The answer of When a hospital uses funds for internal...

Question 11

Which of the following is a major difference between a not-for-profit hospital's statement of operations and statement of changes in net assets?

Accepted Answer

The statement of operations for a not-for-profit hospital typically focuses on the revenues, expenses, and results of operations over a period of time, primarily dealing with unrestricted funds. In contrast, the statement of changes in net assets provides a broader view, covering both unrestricted and restricted net assets, thus showing the overall changes in the financial position of the hospital, including those due to contributions, restrictions, and reclassifications.

Question 12

Which of the following statements about the form and content of a governmental hospital's statement of revenues,expenses,and changes in net position is false?

Accepted Answer

The provision for bad debts is not reported as an operating expense, but rather as a nonoperating expense. This is because bad debts are not considered a regular, ongoing expense of the hospital's operations.

Question 13

Which of the following is reported as an expense by not-for-profit hospitals?

Accepted Answer

Bad debts are reported as an expense by not-for-profit hospitals because they represent amounts that the hospital expected to receive for services provided but were unable to collect.

Question 14

What if Ruth Clark Hospital (Question 34)is a governmental hospital.How would the Ruth Clark Hospital report its interest in the Hospital Foundation and the contributions it received at the end of the first year?

Accepted Answer

Governmental hospitals must follow GASB standards for reporting fund-raising foundations. Therefore, it should present the Foundation as a discretely presented component unit in a separate column if the GASB standards for reporting it are met. This means that the contributions and interest received from the Foundation should be separately reported in the hospital's financial statements. Option A is incorrect because there is a difference in reporting requirements between not-for-profit and governmental hospitals. Option B is incorrect because it does not provide for the required separate reporting of the Foundation's contributions and interest. Option D is also incorrect because it aggregates the unrestricted and restricted contributions, which should be separately displayed.

Question 15

In the statement of operations of a not-for-profit hospital,which of the following is not likely to be a factor in determining Excess of revenues over expenses?

Accepted Answer

Changes in unrealized gains and losses on investments would not be a factor in determining the excess of revenues over expenses as they are not directly related to the operations of the hospital. The other options (net patient service revenue, investment income, provision for bad debts) are all factors that affect the hospital's financial performance and would be considered in determining the excess of revenues over expenses.

Question 16

The Monks Veterinary Hospital receives $1.5 million from the Clementine Foundation.Only the earnings from investing the contribution may be used by the Hospital to conduct research on feline leukemia.Assuming the Hospital uses fund accounting for internal purposes,which funds should be used to report (1)the assets and (2)any investment earnings? $\begin{array}{lll}&\text { original } & \text { investment } \
&\text { contribution } & \text { earnings }\
\hline a.& \text { endowment fund } & \text { endowment fund } \
b.&\text { general fund } & \text { specific purpose fund } \
c.&\text { specific purpose fund } & \text { general fund } \
d.&\text { endowment fund } & \text { specific purpose fund }
\end{array}$

Accepted Answer

The answer of The Monks Veterinary Hospital receives $1.5 million...

Question 17

A group of retired registered nurses decide to volunteer their services to a not-for-profit hospital.They perform a variety of tasks,including: (a)filling in for regular nurses when they are out sick; (b)helping out in food preparation;and (c)selling in the hospital gift shop.For which of the three tasks must donated revenues and expenses be recognized?

Accepted Answer

The answer of A group of retired registered nurses decide...

Question 18

When a hospital uses funds for internal record-keeping purposes,Plant Replacement and Expansion Funds are used to report:

Accepted Answer

The answer of When a hospital uses funds for internal...

Question 19

Differences between a hospital's established rates and amounts negotiated with third-party payers are referred to as:

Accepted Answer

Contractual adjustments refer to the difference between a hospital's established rates and the negotiated amounts with third-party payers. This adjustment accounts for the difference between what the hospital charges and what it is actually paid. Unrecovered costs refer to expenses incurred by the hospital that are not reimbursed, equity adjustments refer to changes in financial statements to account for ownership changes, and restricted revenues refer to funds that are limited for use in certain areas.

Question 20

When a not-for-profit hospital uses funds for internal record-keeping purposes,what types of resources are accounted for in the General Funds?

Accepted Answer

The answer of When a not-for-profit hospital uses funds for...

Quiz 13: Accounting for Health Care Organizations

The accounting and financial reporting procedures for which fund category apply to governmental hospitals?

A not-for-profit hospital receives a $150,000 donation that must be used for a specific research project.The hospital anticipates that it will undertake the project next year.How should the hospital report the donation?

A not-for-profit hospital receives a $25,000 donation that must be used for a special training program for nurses.When the donated resources are used for the intended purpose,in which net asset classification should the hospital report the expense?

A not-for-profit hospital's trustees designate $600,000 of the hospital's unrestricted resources for the future acquisition of equipment.The trustees tell the hospital comptroller to purchase a separate certificate of deposit for it.How should the hospital record and report this investment?

In the statement of operations of a not-for-profit hospital,which of the following increases in net assets is not likely to appear as part of Excess of revenues over expenses?

When a hospital uses funds for internal record-keeping purposes,Specific Purpose Funds are those that are:

Which of the following is a major difference between a not-for-profit hospital's statement of operations and statement of changes in net assets?

Which of the following statements about the form and content of a governmental hospital's statement of revenues,expenses,and changes in net position is false?

Which of the following is reported as an expense by not-for-profit hospitals?

What if Ruth Clark Hospital (Question 34) is a governmental hospital.How would the Ruth Clark Hospital report its interest in the Hospital Foundation and the contributions it received at the end of the first year?

In the statement of operations of a not-for-profit hospital,which of the following is not likely to be a factor in determining Excess of revenues over expenses?

When a hospital uses funds for internal record-keeping purposes,Plant Replacement and Expansion Funds are used to report:

Differences between a hospital's established rates and amounts negotiated with third-party payers are referred to as:

When a not-for-profit hospital uses funds for internal record-keeping purposes,what types of resources are accounted for in the General Funds?