A work colleague of yours developed summary financial statements for Memorial Medical Center , a hospital your
Question:
A work colleague of yours developed summary financial statements for Memorial Medical Center , a hospital your health system is interested in acquiring. His "work in progress" follows this page. On the FINAL
Identify three "problems" with the financial statements (i.e., things that are obviously 'wrong' such as key statement formatting or numbers that don't make sense or "can't be correct"), other than the fact that the statements are not complete. You do not need to be accountants or financial statement experts for this but should be able to identify issues based on what has been covered in the class (e.g., the basic accounting equation).
Based on the income statement and balance sheet, what do you think are the three most important observations (bullet points) about MMMC's financial position if you had to provide a quick summary to your boss?
Memorial Medical Center
($000s)
BALANCE SHEETS
ASSETS
For the Years Ended December 31,
2019
2018
Current assets
Cash and cash equivalents
4,000
37,500
Board designated funds, current portion
11,000
13,000
Patient accounts receivable, net
60,000
70,000
Inventories
8,000
8,500
Prepaid expenses and other current assets
5,000
4,000
Total current assets
88,000
133,000
Investments limited as to use, less current portion
Funds held by trustee
12,000
12,000
Board designated funds
280,000
70,000
Total investments limited as to use
292,000
82,000
Property and equipment
Land and improvements
25,000
25,000
Buildings and fixed equipment
355,000
300,000
Movable equipment
110,000
100,000
490,000
425,000
Less allowances for (accumulated) depreciation
290,000
250,000
Total property and equipment, net
200,000
175,000
Other assets
15,000
20,000
TOTAL ASSETS
595,000
410,000
LIABILITIES AND NET ASSETS
For the Years Ended December 31,
2019
2018
Current liabilities
Accounts payable and other current liabilities
30,000
36,000
Salaries, wages and related liabilities
15,000
12,000
Estimated third party settlements
3,000
2,500
Current portion of long-term debt
4,000
3,000
Total current liabilities
52,000
53,500
Long-term liabilities
Long-term debt, less current portion
473,000
180,000
Other long-term liabilities
5,000
3,500
478,000
183,500
Net assets
187,000
180,000
6
Miller Memorial Medical Center
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
($000s)
As of 12/31/2019
As of 12/31/2018
Operating revenue
Net patient service revenue
430,000
380,000
Other revenue
7,000
4,500
Total operating revenue
437,000
384,500
Operating expenses
Salaries and wages
198,000
135,000
Employee benefits
59,400
40,500
Medical supplies and drugs
58,000
60,000
Physician services
5,000
5,000
Contract services
32,000
50,000
Rent and leases
7,000
7,000
Utilities, supplies and other
32,000
30,000
Depreciation and amortization
40,000
42,300
Interest
8,000
8,600
Total operating expenses
439,400
378,400
Income from operations
(2,400)
6,100
Non-operating gains (losses)
Investment income
6,500
3,400
Excess of revenue over(under) expenses
4,100
9,500
7
Miller Memorial Medical Center
STATEMENTS OF CASH FLOWS
($000s)
For the Year
Ended 12/31/2019
Operating activities
Excess of revenue over(under) expenses
4,100
Adjustments:
Depreciation and Amortization
40,000
Changes in operating assets and liabilities:
Patient accounts receivable
(10,000)
Other current and noncurrent assets
(4,500)
Accounts payable and other current liabilities
6,000
Salaries, wages and related liabilities
3,000
Other long-term liabiliteis
1,500
Estimated third-party payor settlements
500
Net cash flow from operating activities
40,600
Investing activities
Purchases of property and equipment
(65,000)
Change in trustee held investmenets
0
Change in board designated funds
(208,000)
(273,000)
Financing activities
Repayments on long-term debt
294,000
Proceeds from long-term debt
0
Net cash flows from financing activities
294,000
Change in cash and cash equivalents
61,600
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