Comprehensive set of journal entries and financial statements Cort Hospital was established as a nonprofit organization on January 1 to take over the assets of an existing hospital. It had the following transactions during its calendar fiscal year. 1. The hospital sold revenue bonds in the amount of $80.0 million. The hospital received $76.0 million in cash from sale of the bonds. To provide security for payment of the debt service, the other $4.0 million was deposited in an escrow account with a trustee. The trustee immediately invested the cash in U.S. Treasury bills. 2. The physical assets of the existing hospital were purchased for $70.0 million in cash. The appraised values of the assets were as follows: land- $6.0 million; buildings- $56.0 million; and equipment- $8.0 million 3. The hospital provided services of $40.0 million at its established rates to Medicare patients. Its agreement with Medicare provided for contractual adjustments of 25 percent against the established rates. By year-end, the hospital had collected $25.0 million against the billings. 4. The hospital provided services of $20.0 million at its established rates to patients insured by a third party payer. Its agreement with the third party provided for contractual adjustments of 15 percent from the established rates. It also provided for a retrospective adjustment, based on a cost submission by the hospital 30 days after the end of the year. By year-end, the hospital had collected the entire amount that it was owed by the third-party payer. When it prepared its financial statements, the hospital estimated that it owed the third party $160,000, but the final settlement had not yet been negotiated. 5. The hospital provided services to members of an HMO at rates per member, per month, receiving cash premiums totaling $30.0 million for the year. The hospital's internal records showed that, if billings had been made at its established rates, it would have charged the HMO $36.0 million for these services. 6. The hospital provided care to charity patients amounting to $4.0 million at its established billing rates. It estimated the direct and indirect costs of that care to be $2.8 million. 7. The hospital provided care to self-pay patients in the amount of $10.0 million at its established rates. The hospital collected $4.0 million against these billings. At year-end, the hospital received specific adverse information about the ability of self-pay patients' financial condition which indicates they will not be able to pay 35 percent of the remaining amounts due. 8. The hospital had the following functional expenses. Of the amounts shown, $58.0 million was paid in cash. (Depreciation expense on the building and the equipment ( 52.8 million and $1.2 million, respectively, was included in the functional categories.) $44.0 million Health care services Dietary services Maintenance expenses SB.0 million $4.0 million $44.0 million $4.0 million $6.0 million not yet been negotiated. 5. The hospital provided services to members of an HMO at rates per member, per month, receiving cash premiums totaling $30.0 million for the year. The hospital's internal records showed that, if billings had been made at its established rates, it would have charged the HMO $36.0 million for these services. 6. The hospital provided care to charity patients amounting to $4.0 million at its established billing rates. It estimated the direct and indirect costs of that care to be $2.8 million. 7. The hospital provided care to self-pay patients in the amount of $10.0 million at its established rates. The hospital collected $4.0 million against these billings. At year-end, the hospital received specific adverse information about the ability of self-pay patients' financial condition which indicates they will not be able to pay 35 percent of the remaining amounts due. 3. The hospital had the following functional expenses. Of the amounts shown, $58.0 million was paid in cash. (Depreciation expense on the building and the equipment (52.8 million and $1.2 million, respectively, was included in the functional categories.) Health care services Dietary services $8.0 million Maintenance expenses Administrative expenses 9. The hospital paid debt service of $8.0 million on its bonds ($3.2 million in amortization of principal and $4.8 million in interest). It also made a year-end journal entry, reclassifying $3.2 million of long-term debt as current. 10. The hospital recorded accrued expenses at year-end as follows: Health care services Administrative expenses $1.0 million 11. The hospital paid $2.0 million for a claims-made policy for medical malpractice insurance through year-end. Because the policy did not transfer risk to the insurance carrier for incurred but not reported (IBNR) claims, the hospital accrued $600,000 as a liability. (Note: Charge the expenses to the health care services function.) 12. The hospital received a check from the trustee for $200,000, representing earnings on the investment made by the trustee with the escrow money. The investment income is available for the hospital's general operations. 13. The hospital received equity securities from a donor who specified that the securities, together with any earnings thereon, be used for the purpose of upgrading the hospital buildings. The securities had a fair value of $500,000 when the donor made the gift. During the year, the hospital received dividends of $20,000 on the securities. As year-end, when the hospital prepared its financial statements, the securities had a fair value of $540,000. (Assume the hospital's accounting policy provides for recording realized and unrealized gains and losses on restricted net assets in a $4.0 million ospitals general operations. 13. The hospital received equity securities from a donor who specified that the securities, together with any earnings thereon, be used for the purpose of upgrading the hospital buildings. The securities had a fair value of $500,000 when the donor made the gift. During the year, the hospital received dividends of $20,000 on the securities. At year-end, when the hospital prepared its financial statements, the securities had a fair value of $540,000. (Assume the hospital's accounting policy provides for recording realized and unrealized gains and losses on restricted net assets in a single account.) 14. During 2019, the hospital created Cort Hospital Foundation, whose sole purpose is to obtain donations for the hospital. At year-end, the foundation advised the hospital that it had received cash donations of $600,000. Of this amount, $100.000 did not contain donor restrictions, and $500,000 was restricted for upgrading the hospital's equipment. At the hospital's request, the foundation sent to the hospital the entire $100,000 of cash received from contributions without donor restrictions. a) Prepare the necessary journal entries to record these transactions. If no entry is necessary, select 'No debit (or credit) entry needed in the account fields and enter in the amount fields. Debit Credit 0 Account Allowance for uncollectible accounts Cash Patient service revenue 1a. To record sale of bonds 0 0 0 0 0 0 0 0 0 1b. To record the truslee's investment in treasury bills 0 0 0 0 0 0 0 0 2. To record purchase of property and equipment V 0 0 V 0 0 2a. To record revenues from Medicare patients. 0 0 0 0 3b. To record contractual adjustment for Medicare patients. >>>> 0 0 0 0 0 0 10. To record operating expenses unpaid al year end. 0 0 V 0 0 11a. To record payment of malpractice insurance premium. 0 0 0 0 11. To record estimate of uncovered malpractice claims 0 0 V 0 0 12. To record eamings on escrow account. 0 0 V 0 0 13a. To record contribution of equity Securities 0 0 0 0 11a. To record payment of malpractice insurance premium 0 0 0 0 11b. To record estimate of uncovered malpractice claims. V 0 0 0 V 0 12. To record eamings on screw account 0 0 0 0 13a. To record contribution of equity Securities 0 0 V 0 0 13. To record dividends received from equily Securities 0 0 0 0 13. To record change in fair value of equity Securities. 0 0 0 0 0 0 14a. To record donations to Cort Hospital Foundation. 0 0 0 0 14b. To record Cort Hospital Foundation transfer of funds. b) Prepare a statement of operations for 2019. $ 0 0 Cort Hospital Statement of Operations For the Year Ended December 31 Revenues, gains and other support without donor restrictions: Nel patient Service revenue Premium revenue Total revenues, gains and other support Expenses: Health Care Dietary services Administrative Interest 0 $ 0 0 0 0 Maintenance 0 $ 0 b) Prepare a statement of operations for 2019. Cort Hospital Statement of Operations For the Year Ended December 31 Revenues, gains and other support without donor restrictions: Nel patient service revenue Premium revenue Total revenues, gains and other support Expenses Health care Dietary services Administrative Interest 0 0 $ 0 0 0 0 Maintenance 0 0 0 0 Bad debt Total expenses Operating income Other income investment income Excess of revenues over expenses Change in interest in net assets of Central Hospital Foundation Increase in net assets without donor restrictions 0 0 0 $ 0 0 0 c) Prepare a statement of changes in net assets for 2019. Cort Hospital Statement of Changes in Net Assets For the Year Ended December 31, 2019 Nel assets without donor restrictions: Excess of revenues over expenses Change in interest in net assets of Central Hospital Foundation Increase in nel assets without donar restrictions Net assets with donor restrictions: Contributions for equipment acquisition Investment income Nel realized and unrealized gains on investments Change in interest in net assets of Central Hospital Foundation Increase in nel assets with donar restrictions Total increase in nel assets $ 0 0 0 0 0 0 0 0 0 $ c) Prepare a statement of changes in net assets for 2019. Cort Hospital Statement of Changes in Net Assets For the Year Ended December 31, 2019 Nel assets without donor restrictions: Excess of revenues over expenses $ Change in interest in net assets of Central Hospital Foundation Increase in nel assets without donar restrictions Nel assets with donor restrictions: Contributions for equipment acquisition Investment income Nel realized and unrealized gains on investments Change in interest in nel assets of Central Hospital Foundation Increase in net assets with donar restrictions Total increase in nel assets Nel assets, beginning of year Net assets, end of year 0 0 0 0 0 d) Prepare a balance sheet as of December 31, 2019. Enter all contra asset amounts as positive numbers. Cort Hospital Balance Sheet December 31, 2019 ASSETS Current: Cash Patient accounts receivable $ 0 Allowance for doubtful accounts 0 Net patient accounts receivable Total current assets Interest in net assets of Cort Hospital Foundation Assets limited as to use: Held by trustee 0 Cash and investments restricted for capital acquisition 0 Talal assets limited as to use Property, plant, and equipment 0 Accumulated depreciation 0 0 0 0 0 $ 0 0 0 0 d) Prepare a balance sheet as of December 31, 2019 Enter all contra asset amounts as positive numbers. Cort Hospital Balance Sheet December 31, 2019 ASSETS Current Cash Patient accounts receivable $ 0 Allowance for doubtful accounts 0 Nel patient accounts receivable Total current assets Interest in net assets of Cort Hospital Foundation Assets limited as to use: Held by trustee 0 Cash and investments restricted for capital acquisition 0 Total assets limited as to use Property, plant, and equipment 0 Accumulated depreciation 0 Nel property, plant, and equipment Total assets LIABILITIES AND FUND BALANCE Current: Accrued expenses payable Claims payable Current portion of bonds payable Estimated third party settlements Total current liabilities Long term debt Revenue bonds payable 0 0 olol $ $ 0 0 0 0 0 0 Nel assets Without donor restrictions $ 0 With donor restrictions Total nel assets Total liabilities and net assets 0 $ 0 Comprehensive set of journal entries and financial statements Cort Hospital was established as a nonprofit organization on January 1 to take over the assets of an existing hospital. It had the following transactions during its calendar fiscal year. 1. The hospital sold revenue bonds in the amount of $80.0 million. The hospital received $76.0 million in cash from sale of the bonds. To provide security for payment of the debt service, the other $4.0 million was deposited in an escrow account with a trustee. The trustee immediately invested the cash in U.S. Treasury bills. 2. The physical assets of the existing hospital were purchased for $70.0 million in cash. The appraised values of the assets were as follows: land- $6.0 million; buildings- $56.0 million; and equipment- $8.0 million 3. The hospital provided services of $40.0 million at its established rates to Medicare patients. Its agreement with Medicare provided for contractual adjustments of 25 percent against the established rates. By year-end, the hospital had collected $25.0 million against the billings. 4. The hospital provided services of $20.0 million at its established rates to patients insured by a third party payer. Its agreement with the third party provided for contractual adjustments of 15 percent from the established rates. It also provided for a retrospective adjustment, based on a cost submission by the hospital 30 days after the end of the year. By year-end, the hospital had collected the entire amount that it was owed by the third-party payer. When it prepared its financial statements, the hospital estimated that it owed the third party $160,000, but the final settlement had not yet been negotiated. 5. The hospital provided services to members of an HMO at rates per member, per month, receiving cash premiums totaling $30.0 million for the year. The hospital's internal records showed that, if billings had been made at its established rates, it would have charged the HMO $36.0 million for these services. 6. The hospital provided care to charity patients amounting to $4.0 million at its established billing rates. It estimated the direct and indirect costs of that care to be $2.8 million. 7. The hospital provided care to self-pay patients in the amount of $10.0 million at its established rates. The hospital collected $4.0 million against these billings. At year-end, the hospital received specific adverse information about the ability of self-pay patients' financial condition which indicates they will not be able to pay 35 percent of the remaining amounts due. 8. The hospital had the following functional expenses. Of the amounts shown, $58.0 million was paid in cash. (Depreciation expense on the building and the equipment ( 52.8 million and $1.2 million, respectively, was included in the functional categories.) $44.0 million Health care services Dietary services Maintenance expenses SB.0 million $4.0 million $44.0 million $4.0 million $6.0 million not yet been negotiated. 5. The hospital provided services to members of an HMO at rates per member, per month, receiving cash premiums totaling $30.0 million for the year. The hospital's internal records showed that, if billings had been made at its established rates, it would have charged the HMO $36.0 million for these services. 6. The hospital provided care to charity patients amounting to $4.0 million at its established billing rates. It estimated the direct and indirect costs of that care to be $2.8 million. 7. The hospital provided care to self-pay patients in the amount of $10.0 million at its established rates. The hospital collected $4.0 million against these billings. At year-end, the hospital received specific adverse information about the ability of self-pay patients' financial condition which indicates they will not be able to pay 35 percent of the remaining amounts due. 3. The hospital had the following functional expenses. Of the amounts shown, $58.0 million was paid in cash. (Depreciation expense on the building and the equipment (52.8 million and $1.2 million, respectively, was included in the functional categories.) Health care services Dietary services $8.0 million Maintenance expenses Administrative expenses 9. The hospital paid debt service of $8.0 million on its bonds ($3.2 million in amortization of principal and $4.8 million in interest). It also made a year-end journal entry, reclassifying $3.2 million of long-term debt as current. 10. The hospital recorded accrued expenses at year-end as follows: Health care services Administrative expenses $1.0 million 11. The hospital paid $2.0 million for a claims-made policy for medical malpractice insurance through year-end. Because the policy did not transfer risk to the insurance carrier for incurred but not reported (IBNR) claims, the hospital accrued $600,000 as a liability. (Note: Charge the expenses to the health care services function.) 12. The hospital received a check from the trustee for $200,000, representing earnings on the investment made by the trustee with the escrow money. The investment income is available for the hospital's general operations. 13. The hospital received equity securities from a donor who specified that the securities, together with any earnings thereon, be used for the purpose of upgrading the hospital buildings. The securities had a fair value of $500,000 when the donor made the gift. During the year, the hospital received dividends of $20,000 on the securities. As year-end, when the hospital prepared its financial statements, the securities had a fair value of $540,000. (Assume the hospital's accounting policy provides for recording realized and unrealized gains and losses on restricted net assets in a $4.0 million ospitals general operations. 13. The hospital received equity securities from a donor who specified that the securities, together with any earnings thereon, be used for the purpose of upgrading the hospital buildings. The securities had a fair value of $500,000 when the donor made the gift. During the year, the hospital received dividends of $20,000 on the securities. At year-end, when the hospital prepared its financial statements, the securities had a fair value of $540,000. (Assume the hospital's accounting policy provides for recording realized and unrealized gains and losses on restricted net assets in a single account.) 14. During 2019, the hospital created Cort Hospital Foundation, whose sole purpose is to obtain donations for the hospital. At year-end, the foundation advised the hospital that it had received cash donations of $600,000. Of this amount, $100.000 did not contain donor restrictions, and $500,000 was restricted for upgrading the hospital's equipment. At the hospital's request, the foundation sent to the hospital the entire $100,000 of cash received from contributions without donor restrictions. a) Prepare the necessary journal entries to record these transactions. If no entry is necessary, select 'No debit (or credit) entry needed in the account fields and enter in the amount fields. Debit Credit 0 Account Allowance for uncollectible accounts Cash Patient service revenue 1a. To record sale of bonds 0 0 0 0 0 0 0 0 0 1b. To record the truslee's investment in treasury bills 0 0 0 0 0 0 0 0 2. To record purchase of property and equipment V 0 0 V 0 0 2a. To record revenues from Medicare patients. 0 0 0 0 3b. To record contractual adjustment for Medicare patients. >>>> 0 0 0 0 0 0 10. To record operating expenses unpaid al year end. 0 0 V 0 0 11a. To record payment of malpractice insurance premium. 0 0 0 0 11. To record estimate of uncovered malpractice claims 0 0 V 0 0 12. To record eamings on escrow account. 0 0 V 0 0 13a. To record contribution of equity Securities 0 0 0 0 11a. To record payment of malpractice insurance premium 0 0 0 0 11b. To record estimate of uncovered malpractice claims. V 0 0 0 V 0 12. To record eamings on screw account 0 0 0 0 13a. To record contribution of equity Securities 0 0 V 0 0 13. To record dividends received from equily Securities 0 0 0 0 13. To record change in fair value of equity Securities. 0 0 0 0 0 0 14a. To record donations to Cort Hospital Foundation. 0 0 0 0 14b. To record Cort Hospital Foundation transfer of funds. b) Prepare a statement of operations for 2019. $ 0 0 Cort Hospital Statement of Operations For the Year Ended December 31 Revenues, gains and other support without donor restrictions: Nel patient Service revenue Premium revenue Total revenues, gains and other support Expenses: Health Care Dietary services Administrative Interest 0 $ 0 0 0 0 Maintenance 0 $ 0 b) Prepare a statement of operations for 2019. Cort Hospital Statement of Operations For the Year Ended December 31 Revenues, gains and other support without donor restrictions: Nel patient service revenue Premium revenue Total revenues, gains and other support Expenses Health care Dietary services Administrative Interest 0 0 $ 0 0 0 0 Maintenance 0 0 0 0 Bad debt Total expenses Operating income Other income investment income Excess of revenues over expenses Change in interest in net assets of Central Hospital Foundation Increase in net assets without donor restrictions 0 0 0 $ 0 0 0 c) Prepare a statement of changes in net assets for 2019. Cort Hospital Statement of Changes in Net Assets For the Year Ended December 31, 2019 Nel assets without donor restrictions: Excess of revenues over expenses Change in interest in net assets of Central Hospital Foundation Increase in nel assets without donar restrictions Net assets with donor restrictions: Contributions for equipment acquisition Investment income Nel realized and unrealized gains on investments Change in interest in net assets of Central Hospital Foundation Increase in nel assets with donar restrictions Total increase in nel assets $ 0 0 0 0 0 0 0 0 0 $ c) Prepare a statement of changes in net assets for 2019. Cort Hospital Statement of Changes in Net Assets For the Year Ended December 31, 2019 Nel assets without donor restrictions: Excess of revenues over expenses $ Change in interest in net assets of Central Hospital Foundation Increase in nel assets without donar restrictions Nel assets with donor restrictions: Contributions for equipment acquisition Investment income Nel realized and unrealized gains on investments Change in interest in nel assets of Central Hospital Foundation Increase in net assets with donar restrictions Total increase in nel assets Nel assets, beginning of year Net assets, end of year 0 0 0 0 0 d) Prepare a balance sheet as of December 31, 2019. Enter all contra asset amounts as positive numbers. Cort Hospital Balance Sheet December 31, 2019 ASSETS Current: Cash Patient accounts receivable $ 0 Allowance for doubtful accounts 0 Net patient accounts receivable Total current assets Interest in net assets of Cort Hospital Foundation Assets limited as to use: Held by trustee 0 Cash and investments restricted for capital acquisition 0 Talal assets limited as to use Property, plant, and equipment 0 Accumulated depreciation 0 0 0 0 0 $ 0 0 0 0 d) Prepare a balance sheet as of December 31, 2019 Enter all contra asset amounts as positive numbers. Cort Hospital Balance Sheet December 31, 2019 ASSETS Current Cash Patient accounts receivable $ 0 Allowance for doubtful accounts 0 Nel patient accounts receivable Total current assets Interest in net assets of Cort Hospital Foundation Assets limited as to use: Held by trustee 0 Cash and investments restricted for capital acquisition 0 Total assets limited as to use Property, plant, and equipment 0 Accumulated depreciation 0 Nel property, plant, and equipment Total assets LIABILITIES AND FUND BALANCE Current: Accrued expenses payable Claims payable Current portion of bonds payable Estimated third party settlements Total current liabilities Long term debt Revenue bonds payable 0 0 olol $ $ 0 0 0 0 0 0 Nel assets Without donor restrictions $ 0 With donor restrictions Total nel assets Total liabilities and net assets 0 $ 0