Reference no: EM131704391

Question: (Accounting for net patient service revenue)

Ruby Ruth Hospital had the following transactions during the year ended December 31, 2012. Prepare journal entries to record these transactions, and state the amount that Ruby Ruth Hospital would report as net patient service revenue in its operating statement.

1. The hospital provided services to patients insured by third-party payer A amounting to $5 million at its established billing rates. The hospital's prospective billing arrangement with this third party stipulates payment to the hospital of 70 percent of its established rates for services performed. All billings were paid during the year.

2. The hospital provided services to patients insured by third-party payer B amounting to $3 million at its established billing rates. Its retrospective billing arrangement with this third party stipulates that the hospital should receive payment at an interim rate of 90 percent of its established rates, subject to retrospective adjustment based on agreed-upon allowable costs. By yearend, B had paid all the billings. Before issuing its financial statements, the hospital estimated that it would need to refund $250,000 to B, based on allowable costs.

3. The hospital provided services to charity patients amounting to $1 million at its established billing rates.