Question

Under Lennon Hospital’s rate structure, it earned patient service revenue of $9.4 million for the year ended December 31, 2015. However, Lennon did not expect to collect this entire amount because it deemed $1.60 million to be charity care and estimated contractual adjustments to be $840,000.

During 2015. Lennon purchased medical supplies from Harrison Medical Supply Company at a cost of $4,400. Harrison notified Lennon that it was donating the supplies to the hospital.

Lennon is a private not-for-profit entity:

a.	How much should Lennon record as patient service revenue? (Enter your answer in millions rounded to 2 decimal place.)

       

b.	How much should Lennon record as net patient service revenue? (Enter your answer in millions rounded to 2 decimal place.)

      

c.	How should Lennon record the donation of the supplies? (Enter your answer in dollars not in millions.)

      

Answer 1

A	Initial patients revenue for the year	94,00,000
B	Deemed charity donation	16,00,000
C	Patient revenue to be recorded (A-B)	78,00,000
D	Contractual obligations	8,40,000
E	Net patient revenue to be recognised (C-D)	69,60,000
	Rceipt of donation -
	Treat it as a part of contribution and record as inventory
	Contribution A/c Dr	4400
	To Medical supplies		4400