
a.
Prepare
a.

Explanation of Solution
Not for profit organizations: The business entities whose motive of business is not to reap economic benefits and to provide services for the well-being of society.
Prepare journal entry to record the given transaction by assuming Hospital E is a not-for profit organization.
Transaction Number | Account Title | Debit ($) | Credit ($) |
1. | Accounts and notes receivable | 2,979,650 | |
Contractual adjustments | 1,520,000 | ||
Patients service revenue | 3,500,900 | ||
Other operating revenues | 998,750 | ||
(To record accrual of revenues and gains) | |||
2. | Cash | 2,960,600 | |
Assets limited as to use-Cash | 7,350 | ||
Accounts and notes receivable | 2,960,600 | ||
Investment income-without donor restrictions | 7,350 | ||
(To record cash receipts) | |||
3. | Administration expenses | 446,480 | |
General service expenses | 524,360 | ||
Nursing services expenses | 1,031,800 | ||
Other professional services expense | 342,750 | ||
Accounts payable | 891,000 | ||
Accrued payroll | 1,454,390 | ||
(To record accounts payable) | |||
Net assets released from restriction-with donor restrictions | 94,000 | ||
Net assets released from restriction-without donor restrictions | 94,000 | ||
(To record release of restricted net assets) | |||
4. | Nursing services expenses | 140,000 | |
General services expenses | 140,000 | ||
Mortgage payable | 500,000 | ||
Accounts payable | 836,800 | ||
Accrued payroll | 1,279,500 | ||
Cash | 2,896,300 | ||
(To record cash payments) | |||
5. | Assets limited to use-interest receivable | 1,180 | |
Investment income-without donor restrictions | 1,180 | ||
(To record release of restricted net assets) | |||
6. | Administration expense | 49,100 | |
General services expense | 49,100 | ||
Nursing services expense | 110,475 | ||
Other professional service expenses | 36,825 | ||
117,000 | |||
Accumulated depreciation-equipment | 128,500 | ||
(To record allocation of expense) | |||
7. (a) | No entry is required | ||
7. (b) | Inventory | 2,100 | |
Administration expense | 700 | ||
Nursing services expense | 200 | ||
Other professional services expense | 2,700 | ||
General services expenses | 300 | ||
(To record supplies inventory balances) | |||
7.(c) | Mortgage payable | 500,000 | |
Current portion of mortgage payable | 500,000 | ||
(To record mortgage payable due) | |||
8. | Unrealized loss on investments | 663 | |
Assets limited as to use-investments | 663 | ||
(To record unrealized loss in investments) | |||
Closing entry: | |||
9. | Patient services revenue | 3,500,900 | |
Other operating revenues | 998,750 | ||
Investment income-without donor restriction | 8,530 | ||
Contractual adjustments | 1,520,000 | ||
Administration services expenses | 496,280 | ||
General services expense | 713,160 | ||
Nursing services expense | 1,282,475 | ||
Other professional services expense | 376,875 | ||
Unrealized loss on investment | 663 | ||
Net assets-without donor restrictions, undesignated | 118,727 | ||
(To record the closing entry for revenues) | |||
Net assets-without donor restrictions-undesignated | 7,867 | ||
Net assets-without donor restrictions-designated for plant | 7,867 | ||
(To record closing entry for unrestricted net assets) | |||
Net assets-with donor restrictions | 94,000 | ||
Net assets released from restriction-without donor restriction | 94,000 | ||
Net assets-without donor restrictions | 94,000 | ||
Net assets released from restriction-with donor restrictions | 94,000 | ||
(To record closing entry for temporarily restricted and unrestricted) |
(Table 1)
Note:
- Transaction 7 (a): journal entry is not required to be provided for the provision for uncollectible receivable as they are identified to be adequate.
b.
Prepare a
b.

Explanation of Solution
Prepare a balance sheet for Hospital E as of December 31, 2020.
Hospital E | ||
Balance sheet | ||
For the year ended December 31,2020 | ||
(000s omitted) | ||
Particulars | Amount in $ | Amount in $ |
Assets | ||
Current assets: | ||
Cash | 323,600 | |
Accounts and notes receivable (net of uncollectible accounts of $15,800) | 45,550 | |
Inventory | 73,100 | |
Total current assets | 442,250 | |
Assets limited as to use: | ||
Cash | 24,490 | |
Interest receivable | 1,180 | |
Investments | 228,557 | |
Total assets limited as to use | 254,227 | |
Property , plant and equipment: | ||
Land | 210,100 | |
Building (Net of accumulated | 2,776,000 | |
Equipment (Net of accumulated depreciation of $1,153,000) | 1,730,300 | |
Total property, plant and equipment | 4,716,400 | |
Total assets | 5,412,877 | |
Liabilities and net assets | ||
Current liabilities: | ||
Accounts payable | 73,400 | |
Accrued payable | 219,890 | |
Current portion of bonds payable | 500,000 | |
Total current liabilities | 793,290 | |
Long term debt-mortgage payable | 2,000,000 | |
Total liabilities | 2,793,290 | |
Net assets: | ||
Without donor restrictions, undesignated | 2,287,620 | |
With donor restrictions, designated | 254,227 | |
With donor restrictions | 77,740 | 2,619,587 |
Total liabilities and net assets | 5,412,877 |
(Table 2)
c.
Prepare a statement of operations for Hospital for the year ended December 31, 2020.
c.

Explanation of Solution
Prepare a statement of operations for Hospital for the year ended December 31, 2020.
Hospital E | ||
Statement of Operations | ||
For the year ended December 31, 2020 | ||
(000s omitted) | ||
Particulars | Amount in $ | Amount in $ |
Revenue without donor restrictions: | ||
Net patient service revenue | 1,980,900 | |
Other operating revenues | 998,750 | |
Total revenues | 2,979,650 | |
Expense and losses: | ||
Administration expense | 496,280 | |
General services expense | 713,160 | |
Nursing services expense | 1,282,475 | |
Other professional services expenses | 376,875 | |
Total expense | 2,868,790 | |
Excess of revenue over expense and losses | 110,860 | |
Non-operating gains (losses): | ||
Investment income- without donor restrictions | 8,530 | |
Excess of revenue and gains over expense | 119,390 | |
Net assets released from restrictions: | ||
Satisfaction of purpose restrictions | 94,000 | |
Increase in net assets without donor restrictions | 213,390 |
(Table 3)
Note:
- Net patient service revenue is derived from deducting patient service revenue from the net of contractual adjustment that amounts to $1,520,000.
Prepare a statement of changes in net assets for the year ended September 30, 2020.
Hospital E | ||
Statement of Changes in Net Assets | ||
For the year ended December 31, 2020 | ||
(000s omitted) | ||
Particulars | Amount in $ | Amount in $ |
Net assets without donor restrictions: | ||
Excess of revenue and gains over expense and losses | 119,390 | |
Unrealized loss on investments | (663) | |
Net assets released from restrictions | 94,000 | |
Increase in net assets without donor restrictions | 212,727 | |
Net assets with donor restrictions: | ||
Net assets released from restrictions | (94,000) | |
Increase in net assets | 118,727 | |
Net assets at beginning of the year | 2,500,860 | |
Net assets at the end of the year | 2,619,587 |
(Table 4)
d.
Prepare a statement of
d.

Explanation of Solution
Prepare a statement of cash flow for Hospital for the year ended December 31, 2020.
Hospital E | |
Statement of cash flow | |
For the year ended December 31,2020 | |
Particulars | Amount in $ |
Cash flow from operating activities: | |
Change in assets | 118,727 |
Adjustments to reconcile changes in net assets to net cash provided by operating activities: | |
Increase in | (19,050) |
Increase in interest receivable | (1,180) |
Increase in inventory | (2,100) |
Increase in accounts payable | 54,200 |
Increase in accrued payables | 174,890 |
Depreciation | 245,500 |
Unrealized loss on investments | 663 |
Net cash provided by operating activities | 571,650 |
Cash flows from financing activities: | |
Payment on bond principal | (500,000) |
Net cash used in financing activities | (500,000) |
Net increase in cash and cash equivalents | 71,650 |
Cash and cash equivalents, beginning of the year | 276,440 |
Cash and cash equivalents, end of the year | 348,090 |
(Table 5)
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