1. St. Catherines Health System (SCHS) reported the following end of year account balances as of December 31, 2019:

Assets

Cash and temporary investments $300,000

Accounts receivables $2,500,000

Inventory $205,000

Plant and equipment $5,800,000

Accumulated depreciation $312,000

Liabilities

Accounts payable $230,000

Short-term notes payable $30,000

Long-term debt payable $400,000

Net Assets/Equity

Unrestricted assets $7,632,800

Other assets $200

For each of the following 2020 financial transactions, describe the dual entry accounting changes that would result (see first transaction for an example):

a. SCHS collected $2,000,000 in cash from outstanding accounts receivables

- Accounts receivables decreases by $2,000,000

- Cash and temporary investments increase by $2,000,000

b. SCHS purchased $2,000,000 of inventory on credit

c. SCHS provided $9,100,000 of patient services on credit (i.e. billed to insurance companies)

d. SCHS paid $4,660,000 for labor expenses in cash

e. SCHS used $1,930,000 of supplies from its existing inventory to provide patient care services

f. SCHS paid $45,000 in cash on its short-term notes payable

g. SCHS issued $3,800,000 in long-term debt to raise capital for future growth investments

h. SCHS purchased $3,000,000 in new equipment using a short-term note payable

i. SCHS incurred an annual depreciation expense of $95,000

2. Brandywine Homecare, a not-for-profit business, had revenues of $12,000,000 in

2018. Total expenses, less depreciation, was 75% of revenues, and depreciation

expense was $1,500,000. All revenues were collected in cash during 2018 and all expenses except depreciation were also paid in cash during 2018.

a. Construct Brandywines 2018 income statement

b. What were Brandywines net income and estimate of cash flow during 2018?

c. Suppose that Brandywines depreciation expense was doubled for the year. How would such a change affect Brandywines net income and estimate of cash flow for 2018?

d. If Brandywine were a for-profit business (instead of not-for-profit) and paid taxes of 40% on its reported net income, how would such a change affect the companys reported net income and/or cash flow?

3. Great Forks Hospital reported net income of $2,400,000 on total revenue of $30,000,000 for 2018. Depreciation expense totaled $1,000,000 for the year.

a. What were total expenses for 2018?

b. What were total cash expenses for 2018? (assume all expenses except for depreciation were cash expenses)

c. What was the hospitals estimated cash flow for 2018?