ACC 350 Chapter 14 Quiz (Review)

In accordance with its established billing rates, Alpha Hospital provided services amounting to $14 million during the year ended December 31, 2018. The hospital's best estimate of transaction price included contractual ...

In accordance with its established billing rates, Alpha Hospital provided services amounting to $14 million during the year ended December 31, 2018. The hospital's best estimate of transaction price included contractual adjustments of $3 million and charity patient care of $1 million. What amount should Alpha report as patient service revenue in its year 2018 operating statement? a. $10 million b. $13 million c. $14 million d. $11 million A hospital has NOT insured itself for malpractice claims with a third-party insurer. Which of the following statements best expresses the general rule regarding the reporting of liabilities for malpractice claims on the face of the balance sheet? a. They should be reported if it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. b. They should be reported only to the extent that judgments and settlements are due and payable. c. Outstanding claims should be described in the notes to the statements; adjudicated and settled claims should be reported if they have not been paid d. They should be reported if it is highly likely that the disputes ultimately will be resolved in favor of the claimants. Beta Hospital provided services to patients who were covered by the Kelly Health Plan. Beta's arrangement with Kelly called for interim billing rates at 25 percent less than the established rates, as well as a retrospective rate adjustment. Based on its established billing rates, Beta provided services amounting to $4,000,000 to patients covered by Kelly during the year ended December 31, 2018. At year-end, Beta estimated that it would need to refund $150,000 to Kelly in accordance with the cost standards set forth in the retrospective rate arrangement. What amount should Beta report as patient service revenue in its year 2018 financial statements? a. $3,850,000 b. $3,000,000 c. $4,000,000 d. $2,850,000 Gamma Hospital provided services amounting to $10 million at its established billing rates in the year ended December 31, 2018. Included in the $10 million were services of $8 million to Medicare patients. Medicare paid Gamma at 60 percent of Gamma's established rates. Also included in the $10 million were $2 million of services to self-pay patients who did not meet Gamma's criteria for charity care when admitted. Gamma collected $1.5 million from the self-pay patients during the year and estimated that 40 percent of the uncollected amount would not be collected. What amount should Gamma report as patient service revenue in its year 2018 financial statements? a. $6.6 million b. $6.8 million c. $6.3 million d. $10 million On January 10, 2018, Delta Hospital received a bequest in the form of equity securities. Delta was required to hold the securities in perpetuity, but it could spend the income. The securities had cost the donor $2.7 million, but their fair value was $3.4 million when Delta received them. The fair value of the securities fluctuated during the year, and Delta's comptroller calculated that the average fair value during the year was $3.1 million. When Delta prepared its financial statements as of December 31, 2018, the fair value of the securities was $3.3 million. At what amount should Delta report the securities in its financial statements at December 31, 2018? a. $2.7 million b. $3.1 million c. $3.3 million d. $3.4 million Abbott and Costello Labs donated drugs to Epsilon Hospital, a nonprofit entity, in January 2018. If Epsilon had purchased the drugs, it would have paid $600,000. During the year, Epsilon used all the drugs in providing services to patients. How should Epsilon report the donation in its financial statements for the year ended December 31, 2018? a. Report $600,000 as a reduction of operating expenses b. Report nothing c. Report the donation in a note to its financial statements d. Report $600,000 as other revenues (or gains) Omicron Hospital, a nonprofit entity, received $6 million in premium revenue under a capitation contract with Zeta HMO to provide services to subscribing participants. Its internal records showed that Omicron spent $5.6 million in caring for Zeta's subscribers. How should Omicron report the transactions with Zeta in its financial statements? a. Report $400,000 as patient service revenue b. Report $6 million as patient service revenue c. Report $6 million as premium revenue d. Report $400,000 as premium revenue Which of the following is the most likely description of the resources reported by Kappa Hospital on its balance sheet as assets limited as to use? a. An investment of unrestricted resources that is not readily marketable b. A donation that can be used only for cancer research c. A donation that must be held in perpetuity in an Endowment Fund d. An amount designated by Kappa's governing board for plant expansion How should Phi Hospital, a nonprofit hospital, report an unrealized increase in the fair value of its investments with donor restrictions? a. Above the performance indicator, such as part of revenues over expenses b. As a direct addition to total net assets with donor restrictions c. After the hospital's performance indicator d. Only in the notes to its statements Historical experience shows that a hospital sometimes receives malpractice claims in the year after the incidents occur. Which of the following statements best expresses the general rule for reporting liabilities for such claims, if risk of loss has not been transferred to a third-party insurer? a. The hospital should have purchased extended insurance. b. No mention is required to be made of these claims anywhere in the financial statements. c. Liabilities should be recognized in the statements if it is probable that claims will be asserted for incidents occurring before the balance sheet date and the losses can be reasonably estimated. d. A note should be prepared discussing the likelihood that claims will be received after the balance sheet date, but no estimate needs to be made of the possibility of loss. Borrowed $100,000 in cash from a bank. Bought equipment on credit. Sent bills to Medicaid for care of residents. Paid rent on January 1 for the three-month period January-March. Recorded depreciation on equipment it owned. Paid salaries to its employees. Made a year-end accrual for interest owed the bank on money it had borrowed.