Multiple Choice Questions

1. The AICPA Audit and Accounting Guide Health Care Entities is considered category b authoritative guidance that can be used by which of the following?

a. A business-type government hospital.

b. A not-for-profit hospital.

c. A for-profit hospital.

d. All of the above.

2. A not-for-profit hospital would present all of the following financial statements, except a:

a. Balance sheet or statement of financial position.

b. Statement of functional expenses.

c. Statement of operations.

d. Statement of cash flows.

3. Which of the following is a true statement regarding a performance indicator?

a. All health care organizations are required to report a performance indicator.

b. Only governmental health care organizations are required to report a performance indicator.

c. The purpose of reporting a performance indicator is to make it easier to compare the results of operations of not-for-profit health care organizations to those of for-profit health care organizations.

d. The purpose of reporting a performance indicator is to assist in evaluating the efficiency and effectiveness of a health care organization's operating activities.

4. Fees received by a hospital for a "healthy heart" workshop offered to patients should be reported as:

a. Patient service revenue.

b. Administrative service revenue.

c. Other revenue.

d. Non operating gains.

5. Which of the following is an example of an asset limited as to use?

a. Real estate donated to build a clinic for the homeless.

b. Contributed cash that the board is considering setting aside for self-insurance.

c. Investments bequeathed to the health care organization where the income is to be used to fund operating costs for a cancer clinic.

d. Funds from a sale of bonds that are required by covenant to be used to build a new hospital.

6. Why are health care organizations motivated to track the actual costs of services?

a. Both GASB and FASB require it.

b. They must report their actual expenses, so that third-party pay ors will reimburse them.

c. Third-party pay ors contract with the organization to reimburse a set amount, and the organization risks a loss if costs are greater than the amount reimbursed.

d. Any amount not reimbursed by a third-party payor or paid by the patient must be included in the amount reported as charity care.

7. The controller for Blooming field Regional Hospital estimated that the uncollectible patient accounts have increase by $152,000. The controller's journal entry included a debit to Bad Debt Expense and a credit to Allowance for Uncollectible Receivables. Based on this, Blooming field Regional Hospital is

a. An investor-owned health care organization.

b. A nongovernmental not-for-profit health care organization.

c. A governmental not-for-profit health care organization.

d. Properly recording the estimate for uncollectible accounts under the FASB and GASB standards.

8. Wellness Psychiatric Clinic received a large contribution from the family of a former patient. The contribution came with a request that the funds be used or invested to support any activities that the clinic felt would be best. On this not-for-profit clinic's statement of cash flows, this contribution would be reported in which section?

a. Noncapital financing activities.

b. Operating activities.

c. Financing activities.

d. Investing activities.

9. The Patient Protection and Affordability Act, passed in 2010,

a. Is unlikely to impact accounting and financial reporting for health care organizations.

b. May or may not impact Form 990 filings for 501(c)(3) health care organizations.

c. Requires health care organizations to implement new cost accounting systems where each service related to a medical procedure is tracked and submitted for payment separately.

d. Could impact the security and integrity of a health organization's accounting information system.

10. Which of the following would be most useful for evaluating the financial profitability of a not-for-profit health care organization?

a. Current ratio.

b. Debt-to-capitalization.

c. Excess margin.

d. Debt services coverage.