Question:

The Sydney Hospital provides a range of health care services and its payment terms are net 30 days, meaning payment from patients is due 30 days after their discharge from hospital. Suppose the following transactions take place:

March 5 - Patients receive health care services of $60,000

March 10 - Patients receive health care services of $250,000 on terms of net

30 days.

March 15 - Patients pay $60,000 for health care services received on March 5.

March 30 - hospital pays $50,000 for salaries for work done in March

April 1 -The hospital purchases drugs for $160,000 on terms of net 30 days. In

April the hospital uses $35,000 worth of drugs. In May $65,000 of drugs are

used and in June $60,000 of drugs are used.

April 6 - Patients receive health care services of $250,000 on terms of net 30

days.

April 7 - phone bill received for $1,000 for telephone services in March.

April 10 - Patients pay $250,000 for services received in March.

April 30 - Hospital pays $55,000 for salaries for work done in April.

May 1 - Hospital pays phone bill for $1,000 received on April 7.

May 5 - The hospital pays $160,000 for drugs received in April.

May 6 - Patients pay $250,000 for services received in April.

May 15 - Patients receive health services of $200,000 on terms of net 30 days.

May 30 - Hospital pays $45,000 for salaries for work done in May.

June 5 - Patients receive $55,000 in services and pay for them on the same

day.

June 29 - Patients pay $200,000 for services received in May.

June 30 - Hospital pays $40,000 for salaries for work done in June.

a) Calculate this hospital's profit or loss for each of the months of March, April, May and June on both a cash accounting and accrual accounting basis. A separate profit and loss statement for each month is also required.

b) What month was the most profitable for the hospital (explain why)?

c) Calculate the Hospital's profit or loss for the four months ending June on both a cash accounting and accrual accounting basis? If you get the same answer for both methods explain why this is so. If you get a different answer for the cash and accrual methods explain why this happened.