Guys Correct me if I am wrong for the calculation of Net Patient Service Revenue:
Net patient service charges calculation will not include “Charity and Bad debt” Right?
This is NINJA question: and it included both charity (which is correct) but Bad debt? Why?
According to Roger Book: Bad debt exp = operating exp.
Hospital, Inc., a not-for-profit entity with no governmental affiliation, reported the following in its accounts for the current year ended December 31:
Gross patient service revenue from all services provided
at the established billing rates of the hospital (note
that this figure includes charity care of $25,000) $775,000
Provision for bad debts 15,000
Difference between established billing rates and fees
negotiated with third-party payers (contractual adjustments) 70,000
What amount would the hospital report as net patient service revenue in its statement of operations for the current year ended December 31?
A.
$665,000
Incorrect B.
$680,000
C.
$705,000
D.
$735,000
EXPLANATION: FASB Accounting Standards Update (ASU) 2011-07 requires that nongovernmental not-for-profit hospitals record bad debt as a reduction of gross patient service revenue to arrive at net patient service revenue.
Charity care is also a reduction of gross patient revenue, as well as third-party contractual adjustments; therefore, the hospital should record $665,000 ($775,000 – $25,000 – $15,000 – $70,000) as net patient revenue.
AUD :56, 72, 77!
FAR : 74, 77!
BEC : 72, 75!
REG : 72, 81!
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