Select the best answer for each of the following multiple choice
Select the best answer for each of the following multiple-choice items dealing with hospitals:
1. In June 2018, Park Hospital purchased medicines from Jove Pharmaceutical Company at a cost of $2,000. However, Jove notified Park that the invoice was being canceled and the medicines were being donated to Park. Park should record this donation of medicines as
a. A memorandum entry only.
b. Other operating revenues of $2,000.
c. A $2,000 credit to Operating Expenses.
d. A $2,000 credit to Non-operating Expenses.
2. In 2018, Pyle Hospital received a $250,000 pure endowment grant. Also in 2018, Pyle’s governing board designated, for special uses, $300,000 that had originated from unrestricted gifts. What amount of these resources should be accounted for as part of the unrestricted net asset class?
a. $0
b. $250,000
c. $300,000
d. $550,000
3. Cura Hospital’s property, plant, and equipment, net of depreciation, amounted to $10,000,000, with related mortgage liabilities of $1,000,000. What amount should be included in the permanently restricted net asset class?
a. $0
b. $1,000,000
c. $9,000,000
d. $10,000,000
4. Palma Hospital’s patient service revenues for services provided in 2018, at established rates, amounted to $8,000,000 on the accrual basis. For internal reporting, Palma uses the discharge method. Under this method, patient service revenues are recognized only when patients are discharged, with no recognition given to revenues accruing for services to patients not yet discharged. Patient service revenues at established rates using the discharge method amounted to $7,000,000 for 2018. According to GAAP, Palma should report patient service revenues for 2018 of
a. Either $8,000,000 or $7,000,000, at the option of the hospital.
b. $8,000,000.
c. $7,500,000.
d. $7,000,000.
5. Ross Hospital’s accounting records disclosed the following information:
Net resources invested in plant assets (hospital policy is to
release donor restrictions when assets are placed in service) . . . . . .. $10,000,000
Board-designated funds. .. . .. . . .. . . . . . .. .. .. .. . . . . . .. .. . . .. ... 2,000,000
What amount should be included as unrestricted net assets?
a. $12,000,000
b. $10,000,000
c. $2,000,000
d. $0
6. In 2018, Wells Hospital received an unrestricted bequest of common stock with a fair value of $50,000 on the date of receipt of the stock. The testator had paid $20,000 for this stock in 2018. Wells should record this bequest as
a. Non-operating revenues of $50,000.
b. Non-operating revenues of $30,000.
c. Non-operating revenues of $20,000.
d. A memorandum entry only.
7. On March 1, 2018, A. C. Rowe established a $100,000 endowment fund, the income from which is to be paid to Elm Hospital for general operating purposes. Elm does not control the fund’s principal. Rowe appointed West National Bank as trustee of this fund. What journal entry is required by Elm to record the establishment of the endowment?
8. Under Cura Hospital’s established rate structure, patient service revenues of $9,000,000 would have been earned for the year ended December 31, 2019. However, only $6,750,000 was collected because of charity allowances of $1,500,000 and discounts of $750,000 to third-party payers. For the year ended December 31, 2019, what amount should Cura record as net patient service revenues?
a. $6,750,000
b. $7,500,000
c. $8,250,000
d. $9,000,000
9. An organization of high school seniors performs services for patients at Leer Hospital. These students are volunteers and perform services that the hospital would not otherwise provide, such as wheeling patients in the park and reading to patients. These volunteers donated 5,000 hours of service to Leer in 2017. At the minimum wage rate, these services would amount to $22,500, while it is estimated that the fair value of these services was $27,000. In Leer’s 2017 statement of revenues and expenses, what amount should be reported as non-operating revenues?
a. $27,000
b. $22,500
c. $6,250
d. $0
10. Cedar Hospital has a marketable equity securities portfolio that is included appropriately in noncurrent assets in unrestricted funds. The portfolio has an aggregate cost of $300,000. It had an aggregate fair value of $250,000 at the end of 2019 and $290,000 at the end of 2020. If the portfolio was reported properly in the balance sheet at the end of 2020, the change in the valuation allowance at the end of 2020 should be
a. $0.
b. A decrease of $40,000.
c. An increase of $40,000.
d. An increase of $50,000.
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