Reference no: EM131704500

Question 1. In accordance with its established billing rates, Alpha Hospital provided services amounting to $14 million during the year ended December 31, 2012. Included in the $14 million were contractual adjustments of $3 million and charity patient care of $1 million. What amount should Alpha report as net patient service revenue in its year 2012 financial statements?

a. $10 million

b. $11 million

c. $13 million

d. $14 million

Question 2. Beta Hospital provided services to patients who were covered by the Corwin Health Plan. Beta's arrangement with Corwin called for interim billing rates at 25 percent less than the established rates, as well as a retrospective rate adjustment. Based on its established billing rates, Beta provided services amounting to $4,000,000 to patients covered by Corwin during the year ended December 31, 2012. At year-end, Beta estimated that it would need to refund $150,000 to Corwin in accordance with the cost standards set forth in the retrospective rate arrangement. What amount should Beta report as net patient service revenue in its year 2012 financial statements?

a. $2,850,000

b. $3,000,000

c. $3,850,000

d. $4,000,000

Question 3. Gamma Hospital provided services amounting to $10 million at its established billing rates in the year ended December 31, 2012. Included in the $10 million were services of $8 million to Medicare patients. Medicare paid Gamma at 60 percent of Gamma's established rates. Also included in the $10 million were $2 million of services to self-pay patients who did not meet Gamma's criteria for charity care when admitted. Gamma collected $1.5 million from the selfpay patients during the year and estimated that 40 percent of the uncollected amount would not be collected. What amount should Gamma report as net patient service revenue in its year 2012 financial statements?

a. $6.3 million

b. $6.6 million

c. $6.8 million

d. $10 million

Question 4. On January 10, 2012, Delta Hospital received a bequest in the form of equity securities. Delta was required to hold the securities in perpetuity, but it could spend the income. The securities had cost the donor $2.7 million, but their fair value was $3.4 million when Delta received them. The fair value of the securities fluctuated during the year, and Delta's comptroller calculated that the average fair value during the year was $3.1 million. When Delta prepared its financial statements as of December 31, 2012, the fair value of the securities was $3.3 million. At what amount should Delta report the securities in its financial statements at December 31, 2012?

a. $2.7 million

b. $3.1 million

c. $3.3 million

d. $3.4 million

Question 5. Abbott and Costello Labs donated drugs to Epsilon Hospital, a not-for-profit entity, in January 2012. If Epsilon had purchased the drugs, it would have paid $600,000. During the year, Epsilon used all the drugs in providing services to patients. How should Epsilon report the donation in its financial statements for the year ended December 31, 2012?

a. Report nothing

b. Report the donation in a note to its financial statements

c. Report $600,000 as other revenues (or gains)

d. Report $600,000 as a reduction of operating expenses

Question 6. Omicron Hospital, a not-for-profit entity, received $6 million in premium revenue under an agreement with Zeta HMO to provide services to subscribing participants. Its internal records showed that Omicron spent $5.6 million in caring for Zeta's subscribers. How should Omicron report the transactions with Zeta in its financial statements?

a. Report $400,000 as unrestricted premium revenue

b. Report $400,000 as temporarily restricted premium revenue

c. Report $6 million as unrestricted premium revenue

d. Report $6 million as temporarily restricted premium revenue

Question 7. Which of the following is the most likely description of the resources reported by Kappa Hospital on its balance sheet as assets limited as to use?

a. A donation that can be used only for cancer research

b. A donation that must be held in perpetuity in an Endowment Fund

c. An investment of unrestricted resources that is not readily marketable

d. An amount designated by Kappa's governing board for plant expansion

Question 8. How should Phi Hospital, a not-for-profit hospital, report an increase in the fair value of its temporarily restricted investments?

a. Only in the notes to its statements

b. As part of nonoperating revenues (expenses) in its statement of revenues, expenses, and changes in net assets

c. As a gain in its statement of changes in net assets

d. As a direct addition to total net assets