Various Unrelated Transactions. Following are several unrelated transac-tions in

Question

Various Unrelated Transactions. Following are several unrelated transac-tions involving a hospital.

1. The hospital has a contractual agreement with a lender requiring that $500,000 in cash be set aside to meet its future debt payment.

2. The hospital accrued $1,500,000 in patient service revenues. Charity services of $415,000 were also provided. Contractual adjustments total $535,000.

3. An increase of $45,000 was recorded for bad debts.

4. General services of $100,000 were donated by technicians. Normally, the hospital would have purchased these specialized services.

5. An endowment contribution of $1,500,000 was received.

6. Investments held by the hospital increased in fair value by $32,000.

7. The hospital purchased $837,000 in equipment with resources that had been contributed in prior years for such a purchase.

Required

a. Prepare journal entries to record the foregoing transactions, assuming the hospital is a not-for-profit facility.

b. Prepare journal entries to record the foregoing transactions, assuming the hospital is a business-type government facility.

Explanation / Answer

Journal Entry 1 Revenue Deduction-Contractual adjustments       500,000 To Accounts and notes receivable       500,000 2 Accounts & Notes Receivable A/C dr. 15,000,000 To Revenue patient service charges 15,000,000 Revenue deduction - Charity A/C dr.       415,000 To Accounts Notes receivable A/C       415,000 Revenue deduction - Contractual adjustments       535,000 To Receivable & third party Contractual       535,000 3 Allocation for uncollectible receivables & third party contractuals 45000 To Accounts Notes receivable A/C 45000 4 Expenses Other professional services       100,000 To Donate services A/C       100,000 5 Cash A/C dr.       150,000 To Non operating gains - Endowment contribution       150,000 6 Investment - restricted for Specific programs 32000 To Non operating gains - Restricted investment income 32000 7 Equipment A/C dr.       837,000 To cash - restricted fro plant       837,000

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