In a particular month Northwest Medical Clinic reported the following: 1. It provided direct care services to patients, billing them $400,000. Of this amount it received $120,000 in cash, but as a consequence of bad debts it expects to collect a total of only $330,000. 2. It provided direct care to patients covered by insurance and who are members of various group health plans for which, at standard rates, it would have billed $650,000. However, owing to contractual arrangements with the payers, it actually billed them for, and expects to collect, only $480,000. 3. It provided charity care for which it would have billed, at standard rates, $82,000. 4. It received capitation fees of $1,400,000 from health care plans and provided services to members of those plans for which it would have billed, at standard rates, $1,600,000. Prepare appropriate journal entries to recognize revenue.
> The East Eanes School District engaged in or was affected by the following events and transactions during its fiscal year ending June 30, 2018. 1. Teachers and other personnel earned $350,000 in vacations and other compensated absences that they did not
> What are the measurement focus and basis of accounting of governmental funds? What is the traditional rationale for this basis of accounting (used in governmental fund statements)—as opposed to, for example, either a full accrual basis or a budgetary bas
> In addition to bonds payable, what other kinds of long-term debt for governmental activities did the city report in its statement of net position?
> What are the differences between recording a hospital’s expenses by natural classification than by function?
> What is a single audit? What deficiencies in previous practice was the Single Audit Act intended to correct?
> Per the city’s schedule of long-term obligations, what is the total long-term obligation for both governmental and business-type activities? Does this amount reconcile with the long-term liabilities as reported on the government wide statement of net pos
> A state incurs interest on funds used while a highway was under construction. How will this interest be accounted for on the state’s (a) capital project’s fund statements and (b) government-wide statements?
> Why are general capital assets not recorded in governmental funds?
> Should parks be classified as ordinary capital assets or as infrastructure? Should the various elements that make up a park be classified separately? Parks include lighting, restrooms, sports fields, hiking and horse trails, roads, sewage systems, playgr
> A city included the schedule above in its financial statements. 1. Prepare entries to reflect the activity relating to improvements and equipment in both the general-fund and the government-wide statements, assuming, as appropriate, that all transactions
> Do you think that capital projects funds should be limited to accounting for resources that are externally restricted? What about debt service funds?
> The accompanying statements of the parks, recreations, and municipal capital improvement bond fund (a capital projects fund) were drawn from an annual report of Parkville. According to a note in the report (the only one pertaining to the fund), the fund
> Why is a choice of basis of accounting unavoidably linked to measurement focus?
> Pacific Independent School District issued $100 million of general obligation bonds to finance the construction of new schools. The bonds were issued at a premium of $0.6 million. 1. Prepare the capital projects fund journal entries to record the issue o
> The Wickliffe City Council authorizes the restoration of the city library. The project is to be funded by the issuance of bonds, a reimbursement grant from the state, and property taxes. 1. Prepare journal entries in the capital projects fund to reflect
> Select the best answer. 1. A term endowment is a gift a. The principal of which must be returned to the donor after a specified period of time b. The principal of which is available for expenditure after a specified period of time c. The income from whi
> Visit GuideStar at www.guidestar.org. Select two not-for-profit health and welfare organizations that have a similar mission and are of relatively similar size (e.g., the Parkinson’s Disease Foundation and the American Parkinson Disease Association). Sup
> Why is the “fund-raising ratio” of key concern to both donors and financial analysts?
> What special abuse does the AICPA address in its statement of position on the allocation of fund-raising costs? What general criteria does it establish as to when common costs of materials and activities that include a fund-raising appeal can be allocate
> In what significant ways do the FASB standards differ from those of the GASB with respect to the statement of cash flows?
> On July 1, a city issued, at par, $100 million in 6 percent, 20‐year general obligation bonds. It established a debt service fund to account for resources set aside to pay interest and principal on the obligations. In the year that it issued the debt, th
> What is meant by “variance power”? Suppose that a charitable foundation receives a gift that the donor specifies must be used to support the college education of a particular individual. What is the relevance of “variance power” in how the foundation acc
> How do not-for-profits differ from governments in the way they account for business-type activities, such as dining halls, gift shops, and admission fees?
> A museum received gifts of two valuable paintings. It recorded the value of one as an asset and recognized the corresponding revenue. It gave no accounting recognition to the other. What might be a legitimate explanation for such an apparent inconsistenc
> In a recent month a CPA provided 10 hours of volunteer time to the Society for the Visually Impaired. He devoted 7 hours to maintaining the organization’s financial records and 3 to recording tapes of newspapers and magazine articles. If volunteers had n
> In what significant way do not-for-profits account for investments differently from businesses?
> It is sometimes said that performance audits are not “true” audits in that they are conceptually different from traditional financial audits. In what way are they conceptually different?
> Members of the National Accounting Association, a not-for-profit organization, are charged annual dues of $150. Of this amount, $50 is restricted, per association policy, for covering the cost of the association’s journal, which every member receives. In
> Please go to the Internet and obtain the financial report for the most recent year available of the following two (a public and a private) universities. 1. University of North Carolina at Chapel Hill 2. Duke University Analyze the financial reporting dif
> Mr. Griffin Smith donated $3,500,000 to the University of Baton Rouge (a government university) with the stipulation that earnings of the first 10 years be used to provide scholarship for social entrepreneurship program in the university’s College of Soc
> Bronxville College maintains a loan fund of approximately $1 million (including receivables). The funds are invested in stocks and bonds, and all investment income must be added to the balance in the fund. The fund, however, is unrestricted inasmuch as i
> What are the major categories of revenues and expenses for a health care organization?
> Although universities may be characterized by transactions not typically engaged in by other types of entities, most can be accounted for within the framework applicable to not-for-profit organizations in general. Windom College, a not-for-profit institu
> Select the best answer. 1. In June 2017, a public university bills and collects $30 million in tuition for the summer semester that runs from June 1 through July 15. In addition, in May and June it bills $200 million for the fall semester that runs from
> Select the best answer. 1. For purposes of external reporting, private colleges and universities a. Must adhere to all applicable FASB pronouncements b. Must adhere to all applicable GASB pronouncements c. Can opt to follow either all applicable FASB or
> Review the financial statements of the University of Virginia in Table 13-1 of the text. 1. For purposes of internal accounting, the university maintains several funds. Why must the university maintain so many funds? Provide examples of the funds most li
> Near the end of its fiscal year, a not-for-profit university was awarded a $2 million National Science Foundation grant to conduct biological research. Yet, consistent with GAAP, the college made no accounting entries with respect to the grant until the
> A not-for-profit technical college trains computer specialists, most of whom have, in the past, received offers for high-paying jobs in Silicon Valley. What special concerns might you have as to the ability of the college to repay its long-term debts?
> What types of matters do “specific” requirements address?
> How are investments, investment income, and gains and losses on these investments accounted for? Is there a difference in treatment for public as opposed to private colleges and universities?
> What are the three types of endowments? How are they presented on the financial statements of a public and a private college and university? Why are board-designated (or quasi) endowments always classified as unrestricted?
> What are auxiliary enterprises? How are they accounted for?
> A government has outstanding $100 million of 20‐year, 10 percent bonds. They were issued at par and have 16 years (32 semiannual periods) until they mature. They pay interest semiannually. 1. Suppose current prevailing interest rates had decreased to 8 p
> Why are revenues presented on the financial statements net of scholarships and discounts?
> Please go to www.Guidestar.org, and download the Form 990 of three health care organizations for the most recent year available. Note that you will need to create a free account to access the forms: 1. Harris Country Healthcare Alliance 2. Southern Illin
> At the end of the year O’Toole General Hospital, which carries no medical malpractice insurance had the following list of malpractice claims: 1. Mr. Seymour Green, a heart patient, filed a claim for $600,000. Based on Mr. Green’s medical records, the hos
> On June 30, 2018, a county (government) hospital bought 3,000 shares of stock for $94,000 intending to hold the investment for its proposed expansion of its trauma center. The market value of the stock on August 31, 2015, the hospital’s fiscal year-end,
> Prepare journal entries for the following transactions. 1. Mt. Helen Hospital billed the state Medicaid program $365,000 for services provided at its standard billing rate. The prospective payment system gives Medicaid a 38 percent discount from these ra
> A not-for-profit residential assisted living center engaged in the following transactions during the year. Prepare appropriate journal entries. 1. It billed residents for $6,200,000. Of this amount it estimates that $3,000,000 will be paid by third-party
> What are “general” compliance requirements? Provide several examples.
> Select the best answer. 1. A not-for-profit hospital signs a contract with an insurance company in which the company agrees to pay it $6 million in capitation fees for the year July 1, 2017, through June 30, 2018. Between July 1, 2017, and December 31,
> Select the best answer. 1. A not-for-profit hospital pays $150,000 interest on its bonds outstanding. The bonds were issued to finance construction of a new hospital wing. In its statement of cash flow, the interest should be shown as a cash outflow fr
> Did the government issue additional long‐term debt to support governmental activities during the year? Did it repay any long‐term debt used to support governmental activities? Did it engage in any in‐substance defeasances?
> The Dave Health Care Center (DHCC) was created in 2017 to provide medical services to low-income residents of Dave Town. DHCC had the following transactions during the year: 1. Received a pledge from a donor for $20,000, payable in equal installments of
> Below are the abridged operating statements of two not-for-profit hospitals that serve similar populations. 1. What is the performance indicator of the hospitals? 2. Using the performance indicator, which hospital reported better operations? Does anythin
> The data on pages 657–658 pertaining to two not-for-profit hospices were taken from GuideStar, an online database (www.guidestar.org) that provides information about not-for-profit organizations. Names and dates have been changed. The f
> J.M.H. (a not-for-profit) Rehabilitation Center engaged in the following transactions during the year ending December 31, 2018. 1. Michael Vincent donated $625,000 to the hospital to help pay for the purchase of new physical rehabilitation equipment. 2.
> The December 31, 2017, Statement of Net Assets of Mosholu Medical Center, a major urban hospital and research center The following transactions and events occurred in 2018: 1. The hospital received unrestricted pledges of $372,600 and temporarily restric
> The following represent a hospital’s inflows and outflows of cash: • Patient service fees received • Government grants for operating purposes • Government grants for specific research programs • Contribution restricted to construction of a new building •
> 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,
> A public university receives approximately 20 percent of its revenue from state appropriations. In which category of revenues (operating or nonoperating) should it report the state appropriations and why?
> What are the two main components of a single audit?
> What is the Yellow Book, and why has it influenced audits both of state and local governments and of not‐for‐profit organizations?
> Select one of the more recently established (and larger) capital projects funds (a major fund, if there is one). a. From where did the fund receive most of its resources? b. Did the city acquire or construct new capital assets using resources of this fun
> Kevin Watkins is a manager of a CPA firm. At the recommendation of the partner‐in‐charge he applied, and was accepted, for membership on the Accounting Standards Committee of the Government Finance Officers Association. Committee members are selected on
> Merrill Sachs is an accountant with the treasurer’s office of a midsize city. The city is about to issue $50 million in general obligation bonds to construct a new office complex. The treasurer has recommended that the city negotiate the sale of the bond
> In what significant ways would each of the three major statements of a government hospital differ from those of a private not-for-profit hospital?
> State law requires that school district budgets be balanced. After having worked for weeks to reduce expenditures to the minimum that would be educationally acceptable and politically feasible, the school board and the superintendent found the budget sti
> Five (of 10) members of a town council returned from the three‐day national convention of town council members in Las Vegas and submitted their expenses for reimbursement. The bills they presented indicated that they had stayed in luxurious suites, had l
> As business officer of a school district, Charles Bidright is required to sign off on all purchase orders over $1,000. Under state law and district policy all orders over $5,000 must be put out for bid. Government agencies are required to accept the low
> Henry Green is the assistant to a county’s comptroller. During the year he becomes aware of several accounting and budgeting practices that, taken together, clearly establish a pattern that the county is attempting to turn both budget and reporting defic
> In verifying the capital asset records of the electric utility department, Jean Hanson, staff auditor of a city’s internal audit department, noted that several trucks and pieces of equipment were out of service and apparently unrepairable. Therefore, the
> The Office of the Treasurer maintains an investment pool for several quasi‐independent governments, such as housing authorities and development boards, affiliated with a city. Michelle Ruiz, a senior manager in the treasurer’s office, recently became awa
> In June 2018, Jason King completed his audit of a 2017 grant that a city made to Field of Dreams, a private, not‐for‐profit organization that sponsors recreational programs for disadvantaged teens. In the course of his testing, King discovered that mater
> How are the capital projects and debt service funds reported in the government‐wide statement of net position?
> In a management letter following its year‐end audit of the North Country Hospital, the not‐for‐profit hospital’s independent audit firm questioned the adequacy of the hospital’s accounts receivable allowance for contractual adjustments. It noted that owi
> Why is it advantageous to budget for capital outlays apart from operating expenditures?
> Describe at least three limitations, both actual and potential, of SEA indicators, and tell how they might be overcome.
> Discuss the financial and nonfinancial measures that are important in evaluating the fiscal wherewithal of health care organizations.
> Why is it more important for governments and not‐for‐profit organizations than for businesses to report on service efforts and accomplishments?
> Indicate four significant criteria that “operational objectives” should satisfy.
> Rosewood Cancer Hospital, a county hospital, has the following assets: 1. $4 million restricted by third-party reimbursement agreements to be used to replace radiology equipment. 2. Cash and investments totaling $925,000 that the hospital board designate
> In what significant ways would each of the three major statements of a public university differ from those of a private university?
> What are the key reporting options for private colleges and universities?
> What key reporting options are available to government colleges and universities?
> How many debt service funds does the government maintain? How can you tell? Are any of these major funds? If so, for what types of obligations are they maintained?
> Review the 2014 financial statements of Hamilton College in Chapter 2, and respond to the following questions: 1. What percentage of the college’s total revenues (including nonoperating items and revenues of all funds) is attributable to tuition and fees
> In January 2017, Kirkland University receives a pledge of $200,000 to be used exclusively to support research in a specialized area of communication disorders. The university’s fiscal year ends on July 31. In December 2017 (the following fiscal year), Ki
> The following events and transactions relate to a single contribution. 1. A high-tech firm pledged to contribute $1 million in the company’s common stock to a university’s business school if the school would establish a new program in the management of i
> A private college receives the following pledges of support. 1. As part of its annual fund drive, alumni and friends of the college pledge $8 million. The college estimates that about 15 percent of the pledges will prove uncollectible. 2. A CPA firm prom
> Discuss the different kinds of information a user of a hospital’s financial information can obtain from its financial statements. How would this information differ for a nongovernmental versus a governmental hospital?
> The fund balance sheet of Sundown State University, a public institution, is presented below. For purposes of external reporting, the university has opted to report as a special-purpose entity that engages in business type activities. As best the data pe
> A university maintains several plant funds as shown in the condensed balance sheets presented below. The fund structure and presentation are consistent with the AICPA college and university reporting model. Although this model has been superseded by FASB
> A balance sheet of Brown University, issued prior to the effective date of FASB Statement No. 117, is presented below. Recast the fund balance (net asset) section of the balance sheet so that it presents the fund balances in the three categories required
> A foundation promises to donate $1 million to a local public broadcasting station (a not-for-profit organization) in one year. When, and in what amount, should the station recognize revenue? The station applies a discount rate of 10 percent to all pledge
> A not-for-profit organization receives a restricted gift. When, and in which type of fund, should it recognize the revenue? When, and in which type of fund, should it recognize the related expense? What is the reason for the apparent inconsistency betwee
> How many capital projects funds does the government maintain? How can you tell? Are any of these major funds? If so, for what purposes are they maintained?
> The GASB has established a “60-day” rule for the recognition of property taxes in governmental funds. On what basis can you justify such a rule for property taxes but not for other revenues? Do you think the 60-day rule should be extended to all revenues
> In 2018, the Bakersville Independent School District incurred $12 million in expenditures for teachers’ salary and benefits. In that year, the legislature of the state in which the district is located voted to enhance the pension benefits of all teachers
> In October 2018, the Village of Mason levied $80 million of property taxes for its 2019 fiscal year (which is the same as the calendar year). The taxes are payable 50 percent by December 31, 2018, and 50 percent by June 30, 2019. The village collected $5
