On January 1, 201X, Fred Miller was very, very happy. He had just convinced a wealthy donor to give $50,000,000 to start a new hospital in a poor, rural town that did not have another hospital within 50 miles. Fred proceeded to have an attorney incorporate Happy Hospital and file the paperwork for it to qualify as an IRC 501(c)(3) organization. After the hospital was legally formed, the wealthy donor gave Fred the check for $50,000,000, and Fred deposited it in a new Happy Hospital checking account at Small Town Bank. Fred ran financial analyses for operating the new hospital and determined that he needed more than $50,000,000 to finance it. He then met with the board of directors of Small Town Bank and talked the board into loaning the new hospital an additional $20,000,000 as an investment in community growth. In late January 201X, construction began on the new hospital, based on a site and plans that Fred had previously selected. While construction was under way, Fred started work on recruiting administrators and medical staff. The new hospital was finished on November 15, 201X, after the expenditure of $40,000,000. A dedication ceremony was held the next day. The hospital started admitting patients on December 1, 201X. Cash collections from patients during December totaled $8,000,000. Operating expenses paid during the month totaled $10,000,000.

Assignments and Questions

1. Construct an income statement for the calendar year ended December 31, 201X.

2. Construct a statement of cash flows for the calendar year ended December 31, 201X.

3. Construct a balance sheet as of December 31, 201X.

4. What additional information (or adjusting entries) might be needed to make the income statement and balance sheet better reflect economic reality?

5. Who besides Fred might use the financial statements?

6. Should the financial statements be audited? Why or why not?

*There is no other information provided, this is the whole question