The balance sheet of the Hillcrest Home Care Service, a not-for-prot organization providing assistance to the elderly,

The balance sheet of the Hillcrest Home Care Service, a not-for-profit organization providing assistance to the elderly, is presented here:

1. As best as you can tell from the balance sheet, what are Hillcrest’s measurement focus and basis of accounting? Explain.

2. What is the most likely reason that some assets are classified as temporarily restricted and others as permanently restricted?

3. Suppose you are the independent CPA who audited the financial statements of Hillcrest. The comptroller of a town, also one of your clients, reviews the financial statements of Hillcrest and observes that they look remarkably like those of private businesses. He wonders why:

a. The statements of his town are so seemingly complex, consisting of not one, but several, separate fund balance sheets and statements of operations.

b. The financial report consists of two separate sets of statements, each from a different perspective on a different basis of accounting.

c. The statements of his town can’t be more like those of Hillcrest. What would be your most likely response?

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Hillcrest Home Care Service Balance Sheel as of December 31 (in Ihousands) Assets Current assets Cash and cash equivalents Investments 115 232 Accounts receivable (net of estimated uncollectibles of $60,000) Total current assets 652 S 999 Equipment Medical and office equipment Vehicles 75 60 135 52 %83 Less accumulated depreciation Net equipment Other assets Deferred finance charges 15 $1,097 Total assets Liabilities and fund balances Liahilities Current maturities of long-term note Accounts payable Accrued vacation costs Estimated third-party payer $ 18 50 346 settlements % 449 110 S 559 Total current liabilities Long-term debt less current maturities Total liabilities Fund balances Unrestricted Temporarily restricted Permanently restricted 160 273 105 538 $1,091 Total fund balances Total liabilities and fund balances