Consider the following income statement:

a. How does this income statement differ from the one presented in Table 3.1?

b. Did BestCare spend $367,000 on new fixed assets during fiscal year 2007? If not, what is the economic rationale behind its reported depreciation expense?

c. Explain the provision for bad debts entry.

d. What is BestCare’s total profit margin? How can it be interpreted?

Transcribed Image Text:

BestCare HMO Statement of Operations Year Ended June 30, 2007 (in thousands) Revenue: Premiums carned $26,682 Coinsurance 1,689 Interest and other income 242 Total revenues $28,613 Expenses: Salaries and benefits $15,154 Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income 7,507 3,963 19 367 385 $27,395 $ 1,218