Question

Mosby Memorial Hospital, a private, not-for-profit hospital, engaged in the following transactions.
1. At the beginning of the year, the hospital received a bequest in the form of equity securities. Mosby is required to hold the securities in perpetuity, but it can spend the income. The original cost of the securities to the donor was $3.6 million, but their fair value had increased to $4.4 million upon Mosby's receipt. During the year, the fair value of the securities fluctuated, with an average fair value of $4.0 million. When the hospital prepared its financial statements at year end, the fair value of the securities was $4.1 million. At what amount should the hospital report the securities in its financial statements?
2. The American Sleep Apnea Association awarded a research grant of $160,000 to the hospital to fund a study on sleep apnea. During the year, the hospital's research team completed approximately 60 percent of the study, incurring total costs of $192,000. How much of the $160,000 grant should the hospital report as temporarily restricted?
3. Radnor Nursing School provided volunteer nurses two days a week whose services were comparable to those provided by paid nurses. The hospital would have incurred $92,800 in additional compensation and benefit costs, if it had to pay for these services. Can the hospital report these services as contribution? Explain.
4. Members of the local high school's ''Health Occupation Students of America'' club staffed the gift shop and children's waiting rooms. If the hospital had to hire and pay employees to provide these services (all of which were needed for hospital operations), the estimated cost would have been approximately $168,000. How much should the hospital report as compensation expense? Explain.
5. The hospital provided patient services amounting to $1,920,000 at its established billing rate for which it invoiced Medicare $1,440,000. Of the balance, $320,000 was billed to individual patients and $160,000 was for charity care. The hospital estimates that Medicare will pay only 80 percent of the invoiced amounts. Mosby collected $192,000 from individual patients, and the remainder billed to individual patients will be uncollectible. How much should the hospital report as net revenue?
6. The hospital was sued by a patient for $8,960,000 during the year for a malpractice claim. Insurance covers 70 percent of medical malpractice claims. The hospital attorneys expect that the suit will go to trial and estimate that if they lose the case, the judgment will likely be between $1,600,000 and $4,800,000. How much should the hospital recognize as a loss (or expense) for the current year?



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  • CreatedAugust 13, 2014
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