Community Health Systems operates general acute care hospitals in communities across the United States. The company...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Community Health Systems operates general acute care hospitals in communities across the United States. The company reports the following information in Schedule II of its 2017 10-K. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Bad Balance Balance at Acquisitions Beginning of Year and Debt Write- at End $ millions Dispositions Expense Offs of Year December 31, 2017, allowance for doubtful accounts... December 31, 2016, allowance for doubtful accounts... December 31, 2015, allowance for doubtful accounts... $ (21) (365) (17) $3,773 $3,054 4,110 3,504 2,849 3,168 $(2,936) (2,821) (2,545) $3,870 3,773 4,110 Accounts receivable represents the amount customers owe Community Health Systems for services ren- dered. The balance in the allowance for doubtful accounts is the company's best estimate of the amount that customers will not repay. Community Health Systems' balance sheet and income statements reported the following. $ millions 2017 2016 2015 Revenue. $18,398 $21,275 (860) $22,564 1,337 Operating income (loss) before tax (1,878) Total assets 17,450 21,944 26,861 Required a. Compute the common-size allowance for doubtful accounts for each year. Compare 2017 to the prior years; what do we observe? What is one conclusion analysts might draw from this analysis? b. On average, the firms in the S&P 500 report common-size allowance for doubtful accounts between 3% and 5%. Why might Community Health Systems' ratio be so much higher? How could an analyst verify this inference? c. Compute the common-size bad debt expense for each year. Interpret the ratio for 2017. What trend do we observe? d. If the company had recorded bad debt expense of $2,554 in 2017 (which is $500 less than actually recorded), which of the following would be true? (Ignore taxes for this question.) 1. The company would have reported operating loss of $1,378 and cash flow would have been $500 higher. 2. The company would have reported operating loss of $2,378 and cash flow would have been $500 higher. 3. The company would have reported operating loss of $1,378 and cash flow would have been unchanged. 4. The company would have reported operating loss of $1,878 and cash flow would have been unchanged. Community Health Systems operates general acute care hospitals in communities across the United States. The company reports the following information in Schedule II of its 2017 10-K. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Bad Balance Balance at Acquisitions Beginning of Year and Debt Write- at End $ millions Dispositions Expense Offs of Year December 31, 2017, allowance for doubtful accounts... December 31, 2016, allowance for doubtful accounts... December 31, 2015, allowance for doubtful accounts... $ (21) (365) (17) $3,773 $3,054 4,110 3,504 2,849 3,168 $(2,936) (2,821) (2,545) $3,870 3,773 4,110 Accounts receivable represents the amount customers owe Community Health Systems for services ren- dered. The balance in the allowance for doubtful accounts is the company's best estimate of the amount that customers will not repay. Community Health Systems' balance sheet and income statements reported the following. $ millions 2017 2016 2015 Revenue. $18,398 $21,275 (860) $22,564 1,337 Operating income (loss) before tax (1,878) Total assets 17,450 21,944 26,861 Required a. Compute the common-size allowance for doubtful accounts for each year. Compare 2017 to the prior years; what do we observe? What is one conclusion analysts might draw from this analysis? b. On average, the firms in the S&P 500 report common-size allowance for doubtful accounts between 3% and 5%. Why might Community Health Systems' ratio be so much higher? How could an analyst verify this inference? c. Compute the common-size bad debt expense for each year. Interpret the ratio for 2017. What trend do we observe? d. If the company had recorded bad debt expense of $2,554 in 2017 (which is $500 less than actually recorded), which of the following would be true? (Ignore taxes for this question.) 1. The company would have reported operating loss of $1,378 and cash flow would have been $500 higher. 2. The company would have reported operating loss of $2,378 and cash flow would have been $500 higher. 3. The company would have reported operating loss of $1,378 and cash flow would have been unchanged. 4. The company would have reported operating loss of $1,878 and cash flow would have been unchanged.
Expert Answer:
Answer rating: 100% (QA)
a Common size allowance for doubtful debts 2015 2014 2013 Revenues 22564 21501 14854 Bad Debts 4110 ... View the full answer
Related Book For
College Accounting A Practical Approach
ISBN: 978-0132564441
11th Canadian Edition
Authors: Jeffrey Slater, Brian Zwicker
Posted Date:
Students also viewed these accounting questions
-
The ability to analyze financial statements using various categories of ratios is highly-prized skill. Describe in detail what financial statement ratios tell a college business student/employment...
-
From the financial statements and additional information provided in Problem 16A-1 for Dent Corporation, prepare a statement of cash flows using the direct method. In Problem 16A-1 From the following...
-
From the financial statements and additional information provided in Problem 16B-1 for Blumer Limited, prepare a statement of cash flows using the direct method. In Problem 16B-1 From the following...
-
(a) A proton is moving at a speed much slower than the speed of light. It has kinetic energy K1 and momentum P1. If the momentum of the proton is doubled, so P2 = 2p1 how is its new kinetic energy K2...
-
What are the significant differences between nondirective and semi-structured individual interviews? In what circumstances would a nondirective interview be more useful than a semi-structured...
-
In Exercises 51 through 56, find functions h(x) and g(u) such that f(x) = g(h(x)). f(x)=x + 4- 1 3 (x + 4)
-
The mean wages for a sample of employees in a company was \($18.00\) per day with a standard deviation of \($2.50\) per day. Between what two values do 95% of the data lie? (Assume the data set has a...
-
For each of the following independent cases, use FIFO costing to determine the information requested. a. The ending inventory included $87,000 for conversion costs. During the period, 42,000...
-
On a dark evening, householders in Bling Road called police to report that a suspicious person was checking out houses in the street. The callers were unable to provide a physical description of the...
-
a. Determine the magnitude of the resultant force. (Figure 1) b. Determine the coordinate direction angle of the resultant force. c. Determine the coordinate direction angle of the resultant force....
-
A force F = (2, -2, 1) (in newtons) moves an object along a line segment from P(3, 1, 3) to Q(6, 5, 15) (in meters). What is the work done by the force?, what is the measure of the angle between the...
-
Why is it desirable to use multiple sources of secondary data?
-
Describe the information provided by industry services.
-
Should juries be given less discretion to interpret evidence and establish the facts of the case? How do you ensure that a juror doesn't get influenced by the media?
-
What is an audit? Discuss the advantages and disadvantages of audits.
-
Visit Anderson Analytics's website (http://www.andersonanalytics.com/). a. What are the services provided by Anderson Analytics? b. What edge do their services provide when it comes to social media...
-
Credit Cards in Canada :Provide a detailed historical review of the evolution of Credit Cards in Canada including how and when credit cards were first established and who created them.Explain the...
-
5. Convert the following ERD to a relational model. SEATING RTABLE Seating ID Nbr of Guests Start TimeDate End TimeDate RTable Nbr RTable Nbr of Seats RTable Rating Uses EMPLOYEE Employee ID Emp...
-
Janis Evans decided to open an editing service in Vernon. Record the following transactions in the transaction analysis charts: A. Janis invested $3,000 in the editing service from her personal...
-
Prepare the financial statements for the three months ended July 31, 2013. Precision Computer Precision Computer Centre 185 North Escondido Blvd Edmonco AB TOG 1X9 210 Auty S. 2013.. NVOICE To the...
-
Mia Anabelle of Winnipeg began a new business called Mias Nail Spa. The following transactions resulted: A. Mia invested $16,000 cash from her personal bank account into the salon. B. Bought...
-
Figure P32.94 shows, for an AC circuit, the instantaneous current through a circuit element and the potential difference across the element. What can you determine about the element? Data from Figure...
-
The circuit in Figure P32.96 represents your planned design for a wall power supply that will run a radio that usually runs on a 9-V battery. The power supply uses a transformer (not shown) to...
-
Your boss has purchased a new AC power source to run a high-voltage, low-current display, but it is not working. While he is fuming, you look at the owner's manual and discover that this power source...
Study smarter with the SolutionInn App