Question
To respond to the comment: Quesiton is clear. USe the table below to work the journal entries stated in the parapgraph. Central Clinic, Inc. is
To respond to the comment: Quesiton is clear. USe the table below to work the journal entries stated in the parapgraph.
Central Clinic, Inc. is a 501(c)(3) corporation whose mission is to provide low cost health care to qualified individuals. Ostensibly, qualified individuals are those not eligible for Medicare or Medicaid but without other adequate health insurance. In reality, Central Clinic turns away no one in need of health care and, when appropriate, Medicare, Medicaid, or health insurance companies/exchanges are billed for the health care services provided.
Central Clinic was started in a rundown storefront fifteen years ago by a group of young, committed physicians. It has developed an excellent reputation among the medical community for providing quality health care at little or no cost. To further Central Clinics good work, a large number of physicians as well as area hospitals contribute their time, talent, and treasure to Central Clinic. As a result, contributions make up over 50 percent of the clinics financial resources. Contributions consist of volunteer medical services, cash contributions, and donated equipment and supplies.
You are the recently hired accounting manager for Central Clinic and are in charge of reviewing the general ledger accounts and making adjustments as needed under generally accepted accounting principles. Remembering the working trial balance concept from ACG 2021 and ACG 3131, you download the general ledger accounts into Excel and format them into a working trial balance.
After review of the unadjusted balances and detailed analyses of selected accounts, you note a number of items you believe require further analysis. To make sure you remember the difference in adjusting and reclassifying entries, you search Wikipedia for clarification. As you thought, you find adjusting entries affect accounts on different statements and reclassifying entries affect the same type of accounts on the same statement. You also recall GAAP require the statement of activities to present the change in each class of net assets; therefore, you conclude changes affecting different classes of net assets will need to be recorded as adjusting entries rather than reclassifying entries.
Before starting your analysis, you remember Dr. Lathrop's questions from ACG 3501 where she sometimes provided information not relevant to the question. Therefore, you decide to keep an open mind during your analyses and will not assume all the items you noted will require adjustments or reclassifications.
1. A letter you found in the Contributions file from the Physicians Support Group indicates they provided Central Clinic with diagnostic equipment at no charge for three months during the current year. According to Craigs List, the equipment may be rented for $1,500 per month. You were not aware of the situation prior to finding this letter.
2. Depreciation expense was recorded for the year using the depreciation schedule from the prior year. When current year fixed asset additions are considered, the correct amount of depreciation is $225,000. Upon inquiry of your boss, the CFO, you learn Central Clinic considers depreciation expense and mortgage interest to be occupancy-related expenses. 3
. Printing expense includes $5,000 for brochures used in the two-year capital campaign which kicked off this year. All other printing expenses relate to printing patient medical forms and informational flyers about the services the clinic provides.
4. Patient fees include $2,000 a patient paid on December 15 as a down payment on in-office surgical procedures which will be performed in early January.
5. In December, you sent letters to all of the doctors and nurses who volunteered at the Clinic during the year. Based on the letters received to date, you determined the following: a. According to the local chapter of the American Medical Association, general physicians in the area charge an average of $500 per hour when providing general patient diagnostic services. b. The Clinic pays its full time Registered Nurses $35 per hour. c. Ten general physicians each volunteered a total of 24 hours per month every month of the year. They spent all of their time seeing patients. d. Two Registered Nurses each volunteered a total of 10 hours each month of the year. All of their time was spent seeing patients and assisting the general physicians. e. Two neurologists each volunteered a total of 12 hours per month every month of the year. They spent all of their time seeing patients and performing general physician level patient care. The doctors indicated they normally charge $1,100 per hour when providing neurological consults.
6. At the November Board of Directors meeting, the chair of the Board, Dr. Murphy, told you she intended to make her annual end-of-year $5,000 contribution to the Clinic before the end of the fiscal year. You did not make an entry for this at the time since she indicated she would pay before the end of the year. As of early January, no check has been received.
7. Unrestricted contributions revenue includes $15,000 which, based on a letter dated October 1, 2016 from the donor, is to be used to offset patient care expenses next fiscal year..
8. The fair value of unrestricted investments at year end is $350,000.
9. Historically, expenses not directly relating to a specific function were allocated to all functions based on the buildings square footage usage. The analysis you did earlier in the year indicates the relationship of salaries and benefits is a more appropriate allocation basis.
10. A month after you began your job at Central Clinic, you learned the percentages used to allocate salaries and benefits to functions were last revised 10 years ago. Therefore, you studied time records and talked to employees to determine how employees spent their time. Based on these percentages, you determine the following breakdown for salaries and benefits. Patient Care $ 610,000
Pharmacy 145,000
Administration 340,000
Executive 310,000
Fund Raising 220,000
11. Occupancy and related costs are charged to functions based on the relative square footage used for each program/function. Building space is utilized as follows:
Waiting rooms 3,800 square feet
Offices for doctors and nurses 1,800 square feet
Pharmacy 500 square feet
Administration 1,600 square feet
Executive 400 square feet
Fund Raising 500 square feet
Based on your analysis, you prepare properly formatted adjusting and reclassifying entries and post them to the working trial balance. You remember Dr. Lathrop saying in your ACG 3501 class the class journal entries did not include descriptions but in the real world, a proper journal entry always includes a description. In addition, you remember Dr. Lathrop saying proper journal entries list all debits first and then all credits.
| Central Clinic, Inc. | ||||||||||
| Working Trial Balance | ||||||||||
| December 31, 2016 | ||||||||||
| Adjusted | Adjusted and | |||||||||
| Unadjusted Balance | Adjustments | Balance | Reclassifications | Reclassified Balance | ||||||
| Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | |
| Cash | 175,000 | |||||||||
| Pledges Receivable - Unrestricted | 25,000 | |||||||||
| Pledges Receivable - Temporarily Restricted | 300,000 | |||||||||
| Estimated Uncollectible Pledges | 50,000 | |||||||||
| Inventory | 32,000 | |||||||||
| Investments - Unrestricted | 310,000 | |||||||||
| Buildings | 4,800,000 | |||||||||
| Furniture and Equipment | 1,900,000 | |||||||||
| Accumulated Depreciation | 2,300,000 | |||||||||
| Accounts Payable | 75,000 | |||||||||
| Accrued Expenses | 85,000 | |||||||||
| Current Portion Mortgage Payable | 175,000 | |||||||||
| Long-term Portion Mortgage Payable | 3,500,000 | |||||||||
| Unrestricted Net Assets | 345,000 | |||||||||
| Temporarily Restricted Net Assets | 375,000 | |||||||||
| Permanently Restricted Net Assets | 250,000 | |||||||||
| Contributions - Unrestricted | 575,000 | |||||||||
| Contributions - Temporarily Restricted | 400,000 | |||||||||
| Fees for Services - Medicare | 695,000 | |||||||||
| Fees for Services - Medicaid | 825,000 | |||||||||
| Fees for Services - Insurance | 175,000 | |||||||||
| Fees for Services - Patients | 85,000 | |||||||||
| Pharmacy Sales | 42,000 | |||||||||
| Investment Income - Unrestricted | 12,000 | |||||||||
| Net Assets Released from Restrictions | ||||||||||
| Temporarily Restricted | 350,000 | |||||||||
| Unrestricted | 350,000 | |||||||||
| Cost of Pharmacy Sales | 21,000 | |||||||||
| Salaries and Fringe Benefits | 1,625,000 | |||||||||
| Occupancy and Utility Expense | 150,000 | |||||||||
| Mortgage Interest | 200,000 | |||||||||
| Medical Supplies Expense | 100,000 | |||||||||
| Printing and Publishing Expense | 18,000 | |||||||||
| Contract Services | 58,000 | |||||||||
| Medical Equipment Rental Expense | 50,000 | |||||||||
| Depreciation Expense | 200,000 | |||||||||
| Totals | 10,314,000 | 10,314,000 | 0 | |||||||
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