Consider the following income statement:

BestCare HMP Statement of Operations Year Ended June 30, 2012 (in thousand

Revenue:

Premiums earned $26,682

Coinsurance 1,689

Interest and other income 242

Total revenues $28,613

Expenses:

Salaries and benefits $15,154

Medical supplies and drugs 7,507

Insurance 3,963

Provision for bad debts 19

Depreciation 367

Interest 385

Total expenses $27,395

Net income $ 1,218

a) How does this income statement differ from the one presented in Exhibit 11.1?

b) Did BestCare spend $367,000 on new fixed assets during fiscal year 2012? If not, what is the economic rational behind its reported depreciation expense?

c) Explain the provision for bad debts entry.

d) What is BestCare's total margin? How can it be interpreted?

Exhibit 11.1 Park Ridge Homecare Statement of Operations for Year Ended December 31, 2012 and 2011(in thousands)

Revenues:

Patient service revenue $ 4,042 $ 2,687

Provision for bad debts 46 21

Net patient service revenue $ 3,996 $ 2,666

Other operating revenue 27 32

Total revenues $ 4,023 $ 2,698

Expenses:

Salaries and benefits $ 2,714 $ 1,835

Supplies and drugs 1,042 675

Insurance 90 83

Depreciation 21 15

Interest 16 19

Total expenses $ 3,883 $ 2,627

Operating income $ 140 $ 71

Nonoperating income:

Contributions $ 10 $ 22

Investment income 13 6

Total nonoperating income $ 23 $ 28

Net income (excess of revenues

over expenses) $163 $99