Reference no: EM131060627

Question 1-

The Sydney Hospital provides a range of health care services and its payment terms are net 30 days, meaning payment from patients is due 30 days after their discharge from hospital. Suppose the following transactions take place:

• March 5 - Patients receive health care services of $60,000
• March 10 - Patients receive health care services of $250,000 on terms of net 30 days.
• March 15 - Patients pay $60,000 for health care services received on March 5.
• March 30 - hospital pays $50,000 for salaries for work done in March
• April 1 -The hospital purchases drugs for $160,000 on terms of net 30 days. In April the hospital uses $35,000 worth of drugs. In May $65,000 of drugs are used and in June $60,000 of drugs are used.
• April 6 - Patients receive health care services of $250,000 on terms of net 30 days.
• April 7 - phone bill received for $1,000 for telephone services in March.
• April 10 - Patients pay $250,000 for services received in March.
• April 30 - Hospital pays $55,000 for salaries for work done in April
• May 1 - Hospital pays phone bill for $1,000 received on April 7.
• May 5 - The hospital pays $160,000 for drugs received in April.
• May 6 - Patients pay $250,000 for services received in April.
• May 15 - Patients receive health services of $200,000 on terms of net 30 days.
• May 30 - Hospital pays $45,000 for salaries for work done in May.
• June 5 - Patients receive $55,000 in services and pay for them on the same day.
• June 29 - Patients pay $200,000 for services received in May.
• June 30 - Hospital pays $40,000 for salaries for work done in June.

Required:

a) Calculate this Hospital's profit or loss for each of the months of March, April and May on both a cash accounting and accrual accounting basis. Make sure you show your calculations. You need to do a separate profit and loss statement for each month.

b) What month was the most profitable for the hospital? Explain your answer.

c) Calculate the Hospital's profit or loss for the four months ending June on both a cash accounting and accrual accounting basis. If you get the same answer for both methods explain why this is so. If you get a different answer for the cash and accrual methods explain why this happened.

Question 2-

Items from the Prince Harry Hospital's balance sheet, revenue and expense (income) statement and cash flow statement for the 2014/15 and 2013/14 financial years (ending 30 June) were accidentally listed in alphabetical order as follows:

*The cash balances at the beginning and end of the period do not correspond to the figures in the balance sheet as this hospital also holds cash in trust for other organisations and/or individuals.

Required:

a. Prepare balance sheets for these two financial years. Arrange these statements like the balance sheets for the Barwon Health that are in the course materials - ie the statements for the two years should be side by side. Make sure to distinguish between current and non-current assets and liabilities.

b. Prepare income (profit and loss) statements for these two years for this hospital.

c. Identify two significant changes that occurred during this period. Do you think that this hospital is in a good position to pay its short term debts? Explain your answer.

d. Prepare a cash flow statement showing operating, investing and financing cash flows for these two financial years.

e. One of the hospital's surplus buildings has a book value of $3 million and it has been offered $5 million for this property. Do you think that the hospital should accept this offer? Explain what factors the management should consider before accepting this offer.