I am just adding on to my list of doubts on NPO

CPA-04695(Becker)

Hopital inc., a NPO , reported the following:

Gross patient revenue 775000(including charity care 25000)

Provision for doubtful debts 15000

Contractual adjustments 70,000

answer is $680,000(775000-25000-70,000). I agree with what has been deducted. But why is provision for doubtful debts $15,000 not deducted.? I see that in other problems allowance has been adjusted to revenue.

Dr.Cash

Cr. Allowance for uncollectibles

Cr. Revenue

This is the entry in other problems. Why is it handled differently here.? Is it because it is a hospital...?

Please share your thoughts.

Sanjana, i am still stuck in final review of NFP :( ... still doing it.... would try my best to answer your queries in couple of hours, hopefully if i know the solutions.....

Sanjana, we think on the same lines :)

If you look more closely, you would interpret that the illustration follows the indirect method for SCF. Thus, the interest and dividend income restricted for long term investment $300 are being deducted from operating activities section and added in financing activities section.

You are correct, Sanjana !

From Page F9-69 :-

Patient service revenue should be accounted for on the accrual basis, even if the full amount is not expected to be collected.

From page F9-71 :-

Classification of typical hospital expenses:-

e. Bad Debts

Thus, bad debt expense is recognized as an expense, not a contra revenue.

Thanks so much, Divya. I guess I was too shortsighted with regard to the interest income:-)

As far as the bad debt is concerned, I think explanation was not adequate in the text.Anyway thanks again.