Reference no: EM132949067

Problem 1: Which of the following is not true about the application of new revenue recognition rules to private not-for-profit health care entities?

Multiple Choice

Option 1: Revenues are likely to be much lower than under previous rules.
Option 2: Bad debts will be recorded as direct reductions to revenue rather than as a separate expense.
Option 3: A portfolio approach can be used rather than having to record on a contract-by-contract basis.
Option 4: Variable consideration can be reported by either the expected amount method or the most likely outcome method.

Problem 2: Mike Jones spends five days in a local private not-for-profit hospital. The hospital charges him $170,000 for the services. His insurance company has contracts with the hospital that will lower the amount that has to be paid. The hospital believes it has a 60 percent chance that the reduction will be $70,000 and a 40 percent chance that the reduction will be $100,000. The hospital applies the expected amount method to variable consideration. What amount of revenue should be reported?

Multiple Choice

Option 1: $-0-
Option 2: $70,000
Option 3: $88,000
Option 4: $100,000