A local private not$-$for$-$profit health care entity $($Rochester Medical$)$ incurred the following transactions during the current year. The

entity has one program service $($health care$)$ and two supporting services $($fundraising and administrative$)$

a$.$ The board of governors for Rochester Medical $($RM$)$ announces that $$160,000$ in previously unrestricted cash will be used in the

near future to acquire equipment. These funds are invested until the purchase eventually occurs.

b$.$ RM receives a donation of $$80,000$ in cash with the stipulation that the money be invested in U$.$S$.$ government bonds. All

subsequent income derived from this investment must be paid to supplement nursing salaries.

c$.RM$ spends $$40,000$ in cash to acquire medicines. RM had received this money during the previous year. The donor had

specified that it had to be used for medicines.

d$.$ RM charges patients $$2$ million. These amounts are the responsibility of government programs and insurance companies. These

third$-$party payors will recelve explicit price concessions because of long standing contracts. Officials believe RM has an $80$

percent chance of receiving $$1\mathrm{.}5$ million and a $20$ percent chance of receiving $$1\mathrm{.}0$ million. $RM$ has a policy of reporting the most

likely outcome.

e$.RM$ charges patients $$1$ million. These patients are not insured. RM sets implicit price concessions because of the high cost of

health care. Officials believe RM has a $70$ percent chance of collecting $$250,000$ and a $30$ percent chance of receiving

$$100,000.$ As stated before, RM has a policy of reporting the most likely outcome.

f$.$ RM charges patients $$600,000.$ These patients have little or no income. The hospital administration chooses to view this work as

charity care and make no attempt at collection.

g$.$ Depreciation expense for the year is $$110,000.$ Of that amount, $70$ percent relates to health care, $20$ percent to administrative,

and $10$ percent to fundraising.

h$.$ RM receives interest income of $$15,000$ on the investments acquired in $($a$).$

i$.$ Based on past history, officials estimate that $$65,000$ of the reported receivable amount from third$-$party payors will never be

collected. Of the amount reported by uninsured patients who are expected to pay a portion of their debt, officials estimate that

$$20,000$ of the reported receivable amount will not be collected.

The medicines in $($c$)$ are consumed through daily patient care.

j$.$ RM sells the investments in $($a$)$ for Help & Save is a private not$-$for$-$profit entity that operates in Kansas. Swim For Safety is a private not$-$for$-$profit entity that operates in Missouri. The leaders of these two organizations have decided to combine forces on January $1,2020,$ in order to have a bigger impact from their work. They are currently discussing ways by which this combination can be created. The following are statements of financial position for both charities at that date.

HELP & SAVE

Statement of Financial Position

January $1,2020$

Assets

Cash $$1,660,000$

Contributions receivable $($net$)82,000$

Investments $330,000$

Buildings & equipment $($net$)730,000$

Total assets $$2,802,000$

Liabilities

Accounts payable and accrued liabilities $$140,000$

Notes payable $1,130,000$

Total liabilities $$1,270,000$

Net Assets

Net assets without donor restrictions $$1,160,000$

Net assets with donor restrictions $372,000$

Total net assets $$1,532,000$

Total liabilities and net assets $$2,802,000$

SWIM FOR SAFETY

Statement of Financial Position

January $1,2020$

Assets

Cash $$560,000$

Contributions receivable $($net$)222,000$

Investments $200,000$

Buildings & equipment $($net$)620,000$

Total assets $$1,602,000$

Liabilities

Accounts payable and accrued liabilities $$130,000$

Notes payable $650,000$

Total liabilities $$780,000$

Net Assets

Net assets without donor restrictions $$450,000$

Net assets with donor restrictions $372,000$

Total net assets $$822,000$

Total liabilities and net assets $$1,602,000$

The buildings and equipment reported by Help & Save have a fair value of $$936,000.$ The buildings and equipment reported by Swim For Safety have a fair value of $$754,000.$

Required:

a$.$ Assume Help & Save pays $$1\mathrm{.}06$ million in cash from its net assets without donor restrictions to gain complete control over Swim For Safety. If it is not assumed that Swim For Safety will be predominantly supported by contributions and investment income in the future, what balances will appear on the statement of financial position immediately after control is gained? $($Enter your answers in dollars