Modern Healthcare, a group practice clinic with 10 physicians, had the following

Question

Modern Healthcare, a group practice clinic with 10 physicians, had the following income in 2014: Revenue $3,350,000 Less operating expenses: Salaries Physicians $1,250,000 Nurses 150,000 Nursing aide 71,500 Receptionist 46,000 Accounting services 48,000 Training 113,000 Supplies 258,000 Phone and fax 3,500 Insurance 272,000 Depreciation 245,000 Utilities 22,000 Miscellaneous 63,000 Total operating expenses 2,542,000 Income before taxes 808,000 Less taxes on income 282,800 Net income $525,200 The following changes are expected in 2015: 1. The clinic is expecting a 2 percent decline in revenues because of increasing pressure from insurance companies. 2. Physicians are planning to hire a physician assistant at a salary of $51,000 per year. 3. Training costs are expected to increase by $18,000. 4. Supplies are expected to increase to be 10 percent of revenue. 5. Phone, fax, and insurance amounts will stay the same. 6. Depreciation expense will increase by $23,000 per year, since the clinic is planning to purchase equipment for $125,000. 7. Utilities and miscellaneous expenses are expected to increase by 5 percent next year. 8. Taxes on income will be 35 percent. Prepare a budgeted income statement for Modern Healthcare for the year 2015.

Explanation / Answer

Modern Health Care Amt in $ Income statement Current Budgeted 2015 Revenue                         3,350,000                                   3,283,000 Less : Operation Expenses Salaries                         1,565,500                                   1,616,500 Training expense                             113,000                                       131,000 Supplies                             258,000                                       328,300 Phone & Fax                                  3,500                                           3,500 Insurance                             272,000                                       272,000 Depreciation                             245,000                                       268,000 Utilities                               22,000                                         23,100 Miscellaneous                               63,000                                         66,150 Total Operating Expenses                         2,542,000                                   2,708,550 Income before Taxes                             808,000                                       574,450 Taxes On Income                             282,800                                       201,058 Net Income                             525,200                                       373,393

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