Case Study : Nonprofit Hospital Accounting Equation

The expanded accounting equation for a nonprofit is as follows: Assets = Liabilities + Net assets + Revenues Expenses

Assignment:

a) Indicate all financial effects of each transaction on the expanded accounting equation

See transaction 1 below- effect on equation is increase of Assets and Liabilities for $5M each - everything is in excel, below it shows transaction descriptions of 1-10, then Assets, Liabilities, Net Assets, Revenues, Expenses

b) After recording the transactions, total the columns and prepare an abbreviated balance sheet and income statement below

c) What is net income?

d) What is Total Net Assets?

1. Hospital borrowed $5 million from bank. - excel shows $5M in assets and $5M in liabilities

2. Hospital purchased $2 million of supplies on account.

3. 50% of the supplies in transaction #2 were subsequently used for patient care.

4. Hospital billed patients $10 million for services provided.

5. Hospital paid employees $3 million wages.

6. Hospital collected $7 million for services billed in #4.

7. Hospital paid $2 million to suppliers for supplies purchase in #2.

8. Hospital paid bank back $1 million of loan plus $100,000 of interest.

9. Hospital paid utility bills of $1 million.

10. Hospital recorded $3 million of depreciation on equipment.

Totals