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Problem 18-50 (Algo) (LO 18-2, 18-8) A local private not-for-profit health care entity (Rochester Medical) incurred the following transactions during the current year. The entity has one program service (health care) and two supporting services (fundraising and administrative). a. The board of governors for Rochester Medical (RM) announces that $160,000 in previously unrestricted cash will be used in the near future to acquire equipment. These funds are invested until the purchase eventually occurs. b. RM receives a donation of $80,000 in cash with the stipulation that the money be invested in U.S. government bonds. All subsequent income derived from this investment must be paid to supplement nursing salaries. c. RM spends $37,000 in cash to acquire medicines. RM had received this money during the previous year. The donor had specified that it had to be used for medicines. d. RM charges patients $2 million. These amounts are the responsibility of government programs and Insurance companies. These third-party payors will receive explicit price concessions because of long standing contracts. Officials believe RM has an 80 percent chance of receiving $1.5 million and a 201 percent chance of receiving $1.0 million. RM has a policy of reporting the most likely outcome. e. RM charges patients $1 million. These patients are not insured. RM sets implicit price concessions because of the high cost of health care. Officials believe RM has a 70 percent chance of collecting $250,000 and a 30 percent chance of receiving $100,000. As stated before, RM has a policy of reporting the most likely outcome. f. RM charges patients $600,000. These patients have little or no income. The hospital administration chooses to view this work as charity care and make no attempt at collection. Depreciation expense for the year is $110.000. Of that amount 70 percent relates to health care 20 f. RM charges patients $600,000. These patients have little or no income. The hospital administration chooses to view this work as charity care and make no attempt at collection. g. Depreciation expense for the year is $110,000. Of that amount, 70 percent relates to health care, 20 percent to administrative, and 10 percent to fundraising. h. RM receives interest income of $15,000 on the investments acquired in (a). 1. Based on past history, officials estimate that $62,000 of the reported receivable amount from third-party payors will never be collected. Of the amount reported by uninsured patients who are expected to pay at portion of their debt, officials estimate that $20,000 of the reported receivable amount will not be collected. The medicines in (c) are consumed through daily patient care. J. RM sells the investments in (a) for $184,000 in cash. RM used that money plus the previously recorded interest income (along with $25,000 in cash given last year to RM with the donor stipulation that the money be used for equipment) to buy new equipment. k. RM receives pledges near the end of the year totaling $200,000. Of that amount, $38,000 is judged to be conditional. The remaining $162,000 has a donor-stipulated purpose restriction. The present value of the $162,000 is calculated as $131,000. Required: a. Record each of these transactions in appropriate journal entry form. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars not in millions of dollars.) View transaction list View transaction list 1 Record $160,000 in previously unrestricted cash to be used in the near future to acquire equipment. 2 Record the receipt of donation of $80,000 in cash. 3 Record the stipulation that the $80,000 donation be invested in U.S. government bonds. 4 Record the $37,000 expenditure in cash to acquire medicines. RM had received this money during the previous year. 5 Record the reclassification entry for expenditure of $37,000 made for medicines. Note: = journal entry has been entered X 1 16 ar future Credit View transaction list 6 Record the $2 million that RM charges patients. Officials believe RM has an 80 percent chance of receiving $1.5 million and a 20 percent chance of receiving $1 million. RM has a policy of reporting the most likely outcome. 7 Record the $1 million that RM charges patients. These patients are not insured. Officials believe RM has a 70 percent chance of collecting $250,000 and a 30 percent chance of receiving $100,000. 8 Record the $600,000 that RM charges patients. These patients have little or no income. The hospital administration chooses to view this work as charity care and make no attempt at collection. - farah Note: = journal entry has been entered EX www** 16 ar future: | Credit View transaction list 9 Record the depreciation expense for the year is $110,000. Of that amount, 70 percent relates to health care, 20 percent to administrative, and 10 percent to fundraising. 10 Record the receipt of interest income of $15,000 on the investments acquired in (1). 11 Record the officials estimate that $62,000 of the reported receivable amount from third-party payors will never be collected. Of the amount reported by uninsured patients who are expected to pay a portion of their debt, officials estimate that $20,000 of the reported receivable amount will not be collected. 12 Darned the consumption of medicinae se niven in (3) = journal entry has been entered Note: X i 16 ar future Credit View transaction list 12 Record the consumption of medicines as given in (3) through daily patient care. 13 Record the sale of investments for $184,000 in cash. 14 Record the purchase of new equipment. RM used the money from sale of investments plus the previously recorded interest income (along with $25,000 in cash given last year to RM with the donor stipulation 15 Record the reclassification of the amount used to buy the equipment. 16 Record the pledges to be received near the end of the year totaling $200,000. Of that amount, $38,000 is judged to be conditional. The remaining $162,000 has a Note : = journal entry has been entered EX 7 16 ar future Credit > View transaction list 13 Record the sale of investments for $184,000 in cash. 14 Record the purchase of new equipment. RM used the money from sale of investments plus the previously recorded interest income (along with $25,000 in cash given last year to RM with the donor stipulation 15 Record the reclassification of the amount used to buy the equipment. 16 Record the pledges to be received near the end of the year totaling $200,000. Of that amount, $38,000 is judged to be conditional. The remaining $162,000 has a donor-stipulated purpose restriction. The present value of the $162,000 is calculated as $131,000. Note : = journal entry has been entered X " i 16 ar future Credit > b. Prepare a schedule calculating the change in net assets without donor restrictions and net assets with donor restrictions. (Negative amounts should be indicated by a minus sign. Enter your answers in dollars not in millions of dollars.) Assets Without Donor Restrictions Assets With Donor Restrictions Contribution revenue Patient service revenues Interest income Gain on sale of investments Reclassified from net assets with donor restrictions to net assets without donor restrictions Contributions, revenues, and reclassifications 0 Expenses Healthcare. Depreciation Bad debts Pharmaceutical 0 0 Contribution revenue Patient service revenues Interest income Gain on sale of investments Reclassified from net assets with donor restrictions to net assets without donor restrictions Contributions, revenues, and reclassifications Expenses Healthcare Depreciation Bad debts Pharmaceutical Administrative Depreciation Depreciation Fundraising Total expenses Increase in net assets. VVILTIOut Donor Donor Restrictions Restrictions 0 $ 0 0 0 $ 0 0