The Maggie King Hospital, a nonprofit hospital, had the following transactions regarding its

patient service billings.

$1.$ The total services provided by the hospital to all patients during the year amounted to $$9\mathrm{.}5$ million

at the hospital$$s established billing rates.

$2.$ Transaction $1$ includes billings to Medicare $($for services to program beneficiaries$)$ at prospectively

determined rates. Under this program contractual adjustments to the predetermined rates were

$$0\mathrm{.}8$ million.

$3.$ Transaction $1$ also includes billings to third$-$party payer X under an agreement that calls for

retrospective final rates. Interim billing rates under this agreement resulted in contractual

adjustments of $$0\mathrm{.}5$ million.

$4.$ The hospital provided charity care included in transaction $1$ valued at $$250,000$ at the established

rates.

$5.$ The hospital receives specific adverse information regarding patients$$ financial condition, indicating

that these patients will be unable to pay amounts totaling $$150,000.$

$6.$ The hospital collected $$6\mathrm{.}8$ million from third$-$party payers and direct$-$pay patients.

The hospital also wrote off bad debts of $$100,000.$

$7.$ The hospital estimated it would need to refund $$50,000$ to payer X in transaction $3$ when

retrospective rates are determined. $($The hospital$$s receivables include no amounts due from

payer X$.)$

a$)$ Prepare the journal entries needed to record these transactions.

If no entry is necessary, select $\text{'}$No debit $($or credit$)$ entry needed' in the account fields

and enter $0$ in the amount fields.

Account Debit Credit

To record billings at established rates.

To record contractual adjustments for Medicare patients.

To record contractual adjustments for Payer X patients.

To record adjustment for charity care.

To record amounts considered uncollectible.

To record payments received.

To record write off of specific accounts.

To record adjustments for retrospective rates.

b$)$ What is the amount of patient service revenue the hospital will report on its operating statement? $Answer

c$)$ What is the amount of net patient receivables the hospital will report on its balance sheet? $Answer

d$)$ How should estimated third$-$party payer settlements be reported? Answer

e$)$ How should charity care be reported? Answer