Chapter 19, Problem 19.13P

(a)

To determine

Introduction: Journal entries is a systematic method of recording transactions as and when they occur. It is a summary of transactions divided into the debit and credit items that are recorded chronologically. It is an act of keeping and recoding all the transactions occurring in the business.

The journal entries for the transactions for the general fund

Answer to Problem 19.13P

Journal Entries

S.no	Date	Particulars	Debit (in $)	Credit (in$)
1		Accounts receivable	6,160,000
		Patient revenue services		6,160,000
2		Contractual adjustments	330,000
		Accounts receivable		330,000
3		Nursing services	1,800,000
		Other professional services	1,200,000
		Fiscal services	250,000
		General services	1,550,000
		Bad debts	120,000
		Administration	280,000
		Depreciation expense	400,000
		Cash		4,580,000
		Allowance for uncollectibles		120,000
		Accumulated depreciation		400,000
		Accounts payable		170,000
		Accrued expense		35,000
		Inventories		195,000
		Prepaid expenses		30,000
		Donated services (non-operating gain)		70,000
4		Cash	75,000
		Due from specific fund	25,000
		Net assets released from program use restriction		100,000
5		Inventories	176,000
		Prepaid expenses	24,000
		Cash		200,000
6		Cash	85,000
		Income from endowment funds		85,000
7		Cash	17,000
		Accumulated depreciation	20,000
		Property, plant and equipment		30,000
		Gain in sale of equipment		7,000
8		Cash	5,800,000
		Allowance for uncollectibles	132,000
		Accounts receivable		5,932,000
9		Investments	60,000
		Cash		60,000
10		Cash	72,000
		Board designated investments		72,000
11		Accounts payable	150,000
		Accrued expenses	55,000
		Cash		205,000
12		Cash	20,000
		Deferred revenue reimbursement		20,000
13		Cash	140,000
		Net assets released from fixed asset acquisition restriction		140,000
14		Cash	63,000
		Other operating revenue		63,000

Explanation of Solution

1. Recording the amount realized from patient services
2. Recording the contractual adjustments of patients bill
3. Recording the operating expenses
4. Recording the gift received from specific purpose fund and its increment
5. Recording the payment of inventories and prepaid expenses
6. Recording income received from endowment funds
7. Recording the sale of X-ray machine and depreciation on it
8. Recording receivables and writing off a part of it
9. Recording the purchase of investment
10. Recording income from board designated investments
11. Recording the payment of accounts payable and accrued expenses
12. Recording the increase in deferred revenue- reimbursement
13. Recording the receipt of revenue from plant replacement and expansion fund
14. Recording the sale

(b)

To determine

Introduction: The balance sheet of a company discloses the financial position of a company at the end of the year. With the help of a balance sheet one can know the financial capacity of a company at any given point of time.

The comparative balance sheet for the general funds

Answer to Problem 19.13P

Financial statement for the year ended December 31, 20X2 and 20X1

Particulars	20X2	20X1
Assets:
Cash	1,352,000	125,000
Accounts receivable	29,800	400,000
Less: allowance for uncollectibles	(38,000)	(50,000)
Due from specific funds	65,000	40,000
Inventories	76,000	95,000
Prepaid expenses	14,000	20,000
Investments	960,000	900,000
Property, plant and equipment	6,07,000	6,100,000
Less: accumulated depreciation	(1,880,000)	(1,500,000)
Total	6,917,000	6,130,000
liabilities and fund balance
Accounts payable	170,000	150,000
Accrued expenses	35,000	55,000
Deferred revenues	95,000	75,000
Bonds payable	3,000,000	3,000,000
Unrestricted net assets	3,617,000	2,850,000
Total liabilities	6,917,000	6,130,000

Explanation of Solution

The comparative balance sheet of general funds reveal that the value of assets and liabilities increased from $6,130,000 in 20X1 to $6,917,000. An increment of $787,000 was made. this shows that the performance of general fund improved from the previous year but simultaneously the liabilities also increased.

(c)

To determine

Introduction: The statement of activities is the financial statement of a non- profit organization or otherwise. The statement of activities has multiple columns for reporting the amounts for the following net assets:

1. Without donor restriction funds
2. With donor restriction funds
3. The aggregate amount

The statement of activities for the year ended 20X2

Answer to Problem 19.13P

Statement of Activities for the year ended, 20X2

Particulars	Amount (in $)	Amount (in $)
Unrestricted revenues, gains and support:
Net patient service revenues		5,830,000
Gain on sale of equipment	7,000
Cafeteria and gift shop sales	63,000
Investment income	157,000
Donated services	70,000
	10,000
Net assets released fromprogram use restriction	100,000	397,000
Total support and revenue (A)		6,227,000
Operating Expenses:
Nursing services	1,80,000
Professional services	1,200,000
Fiscal services	250,000
General services	1,550,000
Bad debts	120,000
Administration	280,000
Depreciation	400,000
Total expenses (B)		(5,600,000)
Excess of revenue over expenses		627,000
Other items:
Net assets released from fixed asset acquisition restriction		140,000
Increase in unrestricted net assets		$767,000

Explanation of Solution

The statement of activities is the financial statement for a no- profit organization. In the above presented statement of activities, general fund’s various revenues and expenses are shown under their respective heads. The amount of unrestricted fund balance is $767,000

(d)

To determine

Introduction:Cash flow statement records the cash inflows and outflows of cash in an organization during a given period, mostly a financial year. It classifies the

activities of the company in three categories: operating, investing and financing, and discloses the sources and applications of cash for the particular period.

The cash flow for the year ended 20X2

Answer to Problem 19.13P

Cash Flow for the year ended, 20X2

Particulars	Amount (in $)
Cash flow from operating activities
Change in net assets	767,000
Adjustment to reconcile changes in net assets to net cash provided by operating activities:
Depreciation	400,000
Gain on sale of property, plant and equipment	(7,000)
Decrease in net patient accounts receivable	90,000
Increase in due from specific fund	(25,000)
Decrease in inventories	19,000
Decrease in prepaid expenses	6,000
increase in deferred revenue- reimbursements	20,000
net assets released from fixed asset restriction	(140,000)
Net cash provided by operating activities	1,130,000
Investing activities
Sale of property, plant and equipment	17,000
Transfer in from restricted plant fund	140,000
Purchase of investments	(60,000)
Net cash provided by investing activities	97,000
Financing activities	0
net increase in cash	1,227,000
Cash at the beginning of the year	125,000
Cash at the end of the year	1,352,000

Explanation of Solution

The cash flow discloses the following incomes:

Operating income: $1,130,000

Investing income: $97,000

Financing income: 0

Cash at the beginning of the year is reported as $1,352,000