Question
A physician practice provided $5,000,000 worth of services during the year. The practice collected $4,250,000 from patients and payors. The practice is obligated to pay
A physician practice provided $5,000,000 worth of services during the year. The practice collected $4,250,000 from patients and payors. The practice is obligated to pay employees $3,850,000 for time worked, but only $3,280,000 was paid out in cash. Incurred operating expenses amounted to $780,000; $425,000 was paid out in cash during the year. What was the difference between the cash and accrual basis of accounting these transactions? Hint: Do not worry about any contractual allowances/deductions/bad debt for the purpose of this problem.
A. Operating Income in Cash Basis is $180,000 greater than Accrual Basis.
B. Operating Income in Cash Basis is $180,000 less than Accrual Basis.
C. Operating Income in Cash Basis is $175,000 greater than Accrual Basis.
D. Operating Income in Cash Basis is $175,000 less than Accrual Basis.
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