Problem $18-50($Algo$)($LO $18-2,18-8)$

points

A local private not$-$for$-$profit health care entity $($Rochester Medical$)$ incurs the following transactions during the current year. The entity has one program service $($health care$)$ and two supporting services $($fundraising and administrative$).$

a$.$ The board of governors for Rochester Medical $($RM$)$ announces that $\backslash (\backslash$$ $160,000\backslash )$ in previously unrestricted cash will be used in the near future to acquire equipment. These funds are invested until the purchase eventually occurs.

b$.$ RM receives a donation of $\backslash (\backslash$$ $80,000\backslash )$ in cash with the stipulation that the money be invested in U$.$S$.$ government bonds. All subsequent income derived from this investment must be paid to supplement nursing salaries.

c$.$ RM spends $\backslash (\backslash$$ $29,000\backslash )$ in cash to acquire medicines. RM received this money during the previous year. The donor specified that it had to be used for medicines.

d$.$ RM charges patients $\backslash (\backslash$$ $2\backslash )$ million. These amounts are the responsibility of government programs and insurance companies. These third$-$party payors will receive explicit price concessions because of long standing contracts. Officials believe RM has an $80$ percent chance of receiving $\backslash (\backslash$$ $1\mathrm{.}5\backslash )$ million and a $20$ percent chance of receiving $\backslash (\backslash$$ $1\mathrm{.}0\backslash )$ million. RM has a policy of reporting the most likely outcome.

e$.$ RM charges a second group of patients $\backslash (\backslash$$ $1\backslash )$ million. These patients are not insured. RM sets implicit price concessions because of the high cost of health care. Officials believe RM has a $70$ percent chance of collecting $\backslash (\backslash$$ $250,000\backslash )$ and a $30$ percent chance of receiving $\backslash (\backslash$$ $100,000\backslash ).$ As stated before, RM has a policy of reporting the most likely outcome.

f$.$ RM charges a third group of patients $\backslash (\backslash$$ $600,000\backslash ).$ These patients have little or no income. The hospital administration chooses to view this work as charity care and make no attempt at collection.

g$.$ Depreciation expense for the year is $\backslash (\backslash$$ $110,000\backslash ).$ Of that amount, $70$ percent relates to health care, $20$ percent to administrative, and $10$ percent to fundraising.

h$.$ RM receives interest income of $\backslash (\backslash$$ $15,000\backslash )$ on the investments acquired in $($a$).$

i$.$ Based on past history, officials estimate that $\backslash (\backslash$$ $54,000\backslash )$ of the reported receivable amount from third$-$party payors will never be collected. Of the amount reported for uninsured patients who are expected to pay a portion of their debt, officials estimate that $\backslash (\backslash$$ $20,000\backslash )$ of the reported receivable amount will not be collected.

j$.$ The medicines in $($c$)$ are consumed through daily patient care.

k$.$ RM sells the investments in $($a$)$ for $\backslash (\backslash$$ $176,000\backslash )$ in cash. RM used that money plus the previously recorded interest income $($along with $\backslash (\backslash$$ $25,000\backslash )$ in cash given last year to RM with the donor stipulation that the money be used for equipment$)$ to buy new equipment.

$1.$ RM receives pledges near the end of the year totaling $\backslash (\backslash$$ $200,000\backslash ).$ Of that amount, $\backslash (\backslash$$ $38,000\backslash )$ is judged to be conditional. The remaining $\backslash (\backslash$$ $162,000\backslash )$ has a donor$-$stipulated purpose restriction. The present value of the $\backslash (\backslash$$ $162,000\backslash )$ is calculated as $\backslash (\backslash$$ $131,000\backslash ).$

Required:

a$.$ Record each of these transactions in appropriate journal entry form.

b$.$ Prepare a schedule calculating the change in net assets without donor restrictions and net assets with donor restrictions.

Complete this question by entering your answers in the tabs below.

Required A

Record each of these transactions in appropriate journal entry form.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Enter your answers in dollars not in millions of dollars.

Journal entry worksheet

Record $\backslash (\backslash$$ $160,000\backslash )$ in previously unrestricted cash to be used in the near future to acquire equipment.

Note: Enter debits before credits. Required A

Required B

Prepare a schedule calculating the change in net assets without donor restrictions and net assets with donor restrictions.

Note: Deductions should be indicated by a minus sign. Enter your answers in dollars not in millions of dollars.

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|\}$

$\backslash$hline & Assets Without Donor Restrictions & Assets With Donor Restrictions $\backslash \backslash$

$\backslash$hline Contribution revenue & & $\backslash \backslash$

$\backslash$hline Patient service revenues & & $\backslash \backslash$

$\backslash$hline Interest income & & $\backslash \backslash$

$\backslash$hline Gain on sale of investments & & $\backslash \backslash$

$\backslash$hline Reclassified from net assets with donor restrictions to net assets without donor restrictions & & $\backslash \backslash$

$\backslash$hline Contributions, revenues, and reclassifications & $0$ & $0\backslash \backslash$

$\backslash$hline Expenses & & $\backslash \backslash$

$\backslash$hline Healthcare & & $\backslash \backslash$

$\backslash$hline Depreciation & & $\backslash \backslash$

$\backslash$hline Bad debts & & $\backslash \backslash$

$\backslash$hline Pharmaceutical & $0$ & $\backslash \backslash$

$\backslash$hline Administrative & & $\backslash \backslash$

$\backslash$hline Depreciation & & $\backslash \backslash$

$\backslash$hline Fundraising & & $\backslash \backslash$

$\backslash$hline Depreciation & & $\backslash \backslash$

$\backslash$hline Total expenses & $0$ & $0\backslash \backslash$

$\backslash$hline Increase in net assets & $\backslash$$ $0$ & $\backslash (\backslash$$ $0\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$