Question
St Joseph Hospital began operations in December 2014 and had patient service revenues totaling $950,000 for the month. Of this $103,000 is billed to patients,
St Joseph Hospital began operations in December 2014 and had patient service revenues totaling $950,000 for the month. Of this $103,000 is billed to patients, representing their insurance deductibles and copayments. The balance is billed to third party payers, including insurance companies and government health care agencies. St Joseph estimates that 20 percent of these third party payer charges will be deducted by contractual adjustment. The Hospitals fiscal year ends on December 31.
1. Prepare journal entries for December 2014. Assume 15 percent of the amounts billed to patients will be uncollectible.
2. Prepare journal entries for 2015 assuming: a) $82,000 is collected from patients and $9000 written off b) actual contractual adjustments total $171,000. The remaining receivable from third party payers is collected.
3. The actual contractual adjustments differed from the amount initially estimated by the hospital. Briefly describe the type of accounting change this represents and the appropriate accounting treatment.
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