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CPA 2015.0 FAR
Support, Revenues, and Contributions, Question # 1378
Hospital, Inc., a notforprofit
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
B. $680,000
C. $705,000
D. $735,000
You answered B. The correct answer is A.
Nongovernmental notforprofit
hospitals deduct charity services, bad debt, contractual adjustments, and
policy discounts from gross patient service revenues to determine net patient service revenues.
$775,000 $
25,000 $
15,000 $
70,000 = $665,000
and then there’s this MCQ:
CPA 2015.0 FAR
Statement of Activities, Question # 1342
Terry, an auditor, is performing test work for a private notforprofit
hospital. Listed below are
components of the statement of operations:
Revenue for charity care services $100,000
Bad debt expense 70,000
Net assets released from restrictions
used for operations 50,000
Other revenue 80,000
Net patient service revenue (includes revenue
related to charity care) 500,000
What amount would be reported as total revenues, gains, and other support on the statement of
operations?
A. $460,000
Correct B. $530,000
C. $580,000
D. $630,000
You are correct, the answer is B.
Total revenues, gain, and other support will include the following:
Net patient service revenue $500,000
Less Charity care 100,000 $400,000
‐‐‐‐‐‐‐‐
Other revenue 80,000
Net assets released from
restrictions used for
operations 50,000
‐‐‐‐‐‐‐‐
Total $530,000
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Charity care does not qualify for recognition as revenues in the financial statements. These are services
provided without expectation of payment. The bad debt expense would not affect the patient service
revenue reported by a private notforprofit
hospital. In contrast, uncollectible patient accounts would
reduce patient services revenues reported by governmental hospitals.
FASB ASC 9546052510
My question:
Im confused, Isnt a ‘Non-govt NFP Hospital’ the same as a ‘Private Hospital’?
Why are they deducting Bad Debt expense in the first one but not in the second MCQ?
Is one of these two MCQ’s showing an incorrect solution here hopefully? Otherwise, whats the difference bwtween these two entities?
- The topic ‘FAR Not-for-profit Hospital Bad Debt Expense question’ is closed to new replies.
