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 2004? 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:

Revenue: BestCare HMO Statement of Operations Year Ended June 30, 2004 (in thousands) Premiums earned Coinsurance Interest and other income Total revenues Expenses: Salaries and benefits Medical supplies and drugs Insurance Provision for bad debts Depreciation Interest Total expenses Net income $26,682 1,689 242 $28,613 $15,154 7,507 3,963 19 367 385 $27,395 $ 1,218