Ch a12 - Chapter 12 Accounting for Hospitals and Other...

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Chapter 12 - Accounting for Hospitals and Other Health Care Providers C HAPTER 12 Accounting for Hospitals and Other Health Care Providers 12-1. A . C HARITY C ARE : C HARITY CARE OCCURS WHEN A HOSPITAL OR OTHER HEALTH CARE ORGANIZATION PROVIDES CARE TO INDIVIDUALS WHERE THERE IS NO EXPECTATION OF COLLECTION . S ERVICE CHARGES FOR CHARITY CARE ARE NOT RECORDED AS REVENUE . T HE EXPENSES ASSOCIATED WITH THE CARE ARE INCLUDED IN OPERATING EXPENSES . b. B AD D EBT : T HE CURRENT PERIOD PROVISION FOR UNCOLLECTIBLE ACCOUNTS ( I . E . B AD DEBT EXPENSE ) REPRESENTS A COST OF EXTENDING CREDIT . I T IS CLASSIFIED AS AN OPERATING EXPENSE IN THE S TATEMENT OF O PERATIONS . c. C ONTRACTUAL A DJUSTMENTS : C ONTRACTUAL ADJUSTMENTS ARISE WHEN THIRD PARTY PAYORS ( INSURANCE COMPANIES , M EDICARE , OR M EDICAID ) PAY A HEALTH CARE ORGANIZATION LESS THAN THE CUSTOMARY AND NORMAL CHARGE FOR SERVICES PROVIDED TO A PATIENT COVERED BY THE INSURANCE OR GOVERNMENT PROGRAM . C ONTRACTUAL ADJUSTMENTS ARE ESTIMATED AT THE TIME OF THE SERVICE AND ARE REPORTED AS A CONTRA - REVENUE IN DETERMINING N ET P ATIENT S ERVICE R EVENUE IN THE S TATEMENT OF O PERATIONS . 12-2. ( A ) W HEN PROPERTY , PLANT AND EQUIPMENT IS ACQUIRED USING UNRESTRICTED RESOURCES , THE PROPERTY , PLANT AND EQUIPMENT COULD BE RECORDED AS FIXED ASSETS IN EITHER THE UNRESTRICTED OR THE TEMPORARILY RESTRICTED CLASS . I F IT IS RECORDED IN THE TEMPORARILY RESTRICTED CLASS , IT WILL BE NECESSARY TO RECLASSIFY NET ASSETS TO THE TEMPORARILY RESTRICTED NET ASSETS IN THE AMOUNT OF ACQUISITION COST . ( B ) W HEN PROPERTY , PLANT AND EQUIPMENT IS ACQUIRED USING TEMPORARILY RESTRICTED RESOURCES , THE HEALTHCARE ENTITY COULD RECLASSIFY THE ENTIRE ACQUISITION PRICE AND RECORD THE PROPERTY , PLANT AND EQUIPMENT AS UNRESTRICTED NET ASSETS AND DEPRECIATE . T HE UNDEPRECIATED COST WOULD BE INCLUDED IN THE BALANCE OF UNRESTRICTED NET ASSETS . A LTERNATIVELY , THE ENTITY COULD RECORD THE PROPERTY , PLANT AND EQUIPMENT AS TEMPORARILY RESTRICTED AND RECLASSIFY NET ASSETS IN ACCORDANCE WITH THE DEPRECIATION SCHEDULE AND CHARGE DEPRECIATION AS AN UNRESTRICTED EXPENSE . I N THIS CASE , THE UNDEPRECIATED COST WOULD BE INCLUDED IN THE TEMPORARILY RESTRICTED NET ASSET BALANCE . 12-1
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Chapter 12 - Accounting for Hospitals and Other Health Care Providers 12-3. OPERATING REVENUES OPERATING EXPENSES OTHER INCOME I NCREASE D ECREASE I NCREASE D ECREASE I NCREASE D ECREASE 1 2 3 X 4 X 5 6 X 7 X 8 X 9 X* X* 10 X X* E ITHER ANSWER IS CORRECT DEPENDING ON THE ORGANIZATION S POLICY AND PAST PRACTICE . 12-4. A. I. N ONGOVERNMENTAL NOT - FOR - PROFIT HEALTH CARE ENTITIES HAVE CATEGORY (A) GAAP DEFINED BY THE FASB, WHICH HAS PASSED SEVERAL STANDARDS THAT APPLY SPECIFICALLY TO NOT - FOR - PROFIT ORGANIZATIONS , SUCH AS S TATEMENTS 116, 117, 124, AND 136. C ATEGORY (B) GAAP IS CONTAINED IN THE AICPA H EALTH C ARE G UIDE .
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