Question 1

A private sector not-for-profit hospital received a gift of $200,000 cash on the first day of 2017 with a donor restriction that the resources be used to purchase certain equipment. The equipment was purchased on the same day and is expected to last ten years with no salvage value. The Statement of Financial Position as of December 31, 2017 would reflect as net assets of:

Accepted Answer

Depending on the policy of the hospital with respect of fixed assets purchased from donor restricted funds, the Statement of Financial Position as of December 31, 2017 would reflect as net assets of: $200,000 unrestricted and $0 temporarily restricted or $0 unrestricted and $200,000 temporarily restricted.

Question 2

Which of the following is correct with respect to the recording of charity care for health care organizations?

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations.

Question 3

The statement reflecting revenues, expenses, and other changes in unrestricted net assets for a private sector, not-for-profit hospital is called the:

Accepted Answer

The Statement of Operations reflects changes among unrestricted net assets.

Question 4

Private sector, not-for-profit health care organizations have a category of assets called "Assets Whose Use is Limited." That category refers to:

Accepted Answer

Assets whose use is limited is an unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for the future.

Question 5

A private sector, not-for-profit hospital received a pledge of $150,000 in 2016 to be used for a building to be constructed in 2017 but contingent on the hospital being able to raise an equivalent amount from other donors. As of the end of 2016, two-thirds of the amount had been raised from other donors. In 2017, the hospital raised the remaining amount from other donors. The donor gave the $150,000 to the hospital in 2017 and the building was completed in 2018. In which year should the hospital recognize the $150,000 from the pledge?

Accepted Answer

The pledge is recorded after the full amount of matching funds had been raised which would be in 2017.

Question 6

Which of the following is true regarding the reporting of expenses by private sector, not-for-profit hospitals?

Accepted Answer

All expenses are considered reductions in unrestricted net assets for private sector, not-for-profit hospitals.

Question 7

Which of the following is true regarding the financial statements of a private sector not-for-profit hospital?

Accepted Answer

All three statements are true. revenues are measured using the accrual basis of accounting, changes in net assets must be shown by net asset classification and the statement of cash flows uses a three-category format.

Question 8

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

Accepted Answer

Contributed services are recognized as revenue only specific circumstances; if the service 1) creates or enhances nonfinancial assets or 2) requires specialized skills, is provided by someone possessing those skills, and typically would be purchased if not provided by donation. An architect developed building plans for a new outpatient clinic would qualify but not a volunteer answering the phone.

Question 9

Not-for-profit health care entities are distinguished from voluntary health and welfare organizations in the following manner:

Accepted Answer

Health care organizations are considered to be primarily business-oriented whereas voluntary health and welfare organizations raise a significant portion of their money from voluntary contributions.

Question 10

A donor pledged $500,000 to a not-for-profit hospital in 2016 to conduct medical research, conditional on the hospital raising $500,000 from other donors. The other donors met the condition in 2016 The donor transferred the funds to the hospital in 2017. In which year would the revenue be recognized?

Accepted Answer

The pledge is recorded after the full amount of matching funds had been raised which would be in 2016.

Question 11

Which of the following health care organizations have "Category B" GAAP established by the AICPA's Audit and Accounting Guide: Health Care Organizations?

Accepted Answer

The Health Care Guide applies equally to private not-for-profit governmentally owned and investor-owned health care organizations. The AICPA Health Care Guide provides certain additional accounting and reporting requirements beyond those required by the FASB and the GASB standards. As both the FASB and the GASB approved the Health Care Guide, its requirements constitute Category B GAAP and must be followed by all health care organizations.

Question 12

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 $1,000,000 donation is permanently restricted and the income is temporarily restricted until it is used for cancer research.

Question 13

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

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations. Contractual Adjustment is a contra revenue account, not an expense. Patient service revenues are to be reported in the operating statement net of the provision for uncollectible accounts and estimated contractual adjustments with Medicare, Medicaid or insurance companies.

Question 14

Which of the following health care organizations must follow standards established by the Governmental Accounting Standards Board GASB?

Accepted Answer

Private not-for-profit health care organizations follow FASB standards, including those specifically applicable to not-for-profits. Private for-profit health care organizations follow FASB standards excluding those written specifically for-not-for profits. If a health care organization is owned or controlled by a government, it is typically considered a special-purpose entity engaged only in business-type activities and would use proprietary fund accounting and follow GASB.

Question 15

Which of the following is not a required statement of a private not-for-profit hospital?

Accepted Answer

Required statements for a not-for-profit hospital are the Balance sheet/Statement of Financial position, Statement of Operations, Statement of Changes in Net Assets, Statement of Cash Flows and Notes to the Financial Statements. A Statement of Functional Expenses is not required.

Question 16

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

Accepted Answer

Expenses may be reported either by natural classification salaries, supplies, etc.) or functional classification professional care of patients, general services, etc.). Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

Question 17

A "performance indicator" is required in the Statement of Operations for health care entities. Which of the following must be reported below that performance indicator?

Accepted Answer

Other revenue, such as parking lot or cafeteria revenue and net assets released from restrictions for operating purposes are both included in the calculation of operating income.

Question 18

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

Accepted Answer

Patient service revenue makes no provision for and does not include charity care. Patient service revenue is reported net of contractual adjustments.

Question 19

A private sector, not-for-profit hospital received a pledge of $100,000 in 2016, with no purpose restriction. The pledge card indicated that the funds were to be paid and used in 2017. Cash was turned over to the hospital in 2017. The not-for-profit hospital would recognize contribution revenue in:

Accepted Answer

The revenue is recorded when the pledge is made.

Question 20

Which of the following is not true regarding financial reporting of health care entities?

Accepted Answer

Both private sector and public sector health care entities use accrual accounting.

Quiz 12: Accounting for Hospitals and Other Health Care Providers