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Question 1

Whitt Valley Presbyterian Hospital is a nonprofit initialcare facility. For the hospital’s calendar year ending December 31,2019, prepare (I) journal entries to record the transactions listedin a. through n. below, (II) a trial balance based on your entriesand the beginning balances listed at o. below, and (III) aStatement of Operations and a Statement of Changes in Net Assetsfor the hospital.

1. Third-parties payers and direct-pay patients were billed$6,500,000 at the hospital's established billing rates
2. The hospital determined that certain of its patientsqualified for charity care and that it would not seek to collect$950,000 at established billing rates from direct-paypatients
3. The hospital estimated contractual adjustments for theyear of $1,600,000
4. The hospital originally estimated uncollectible amountsfrom direct-pay patients to be $250,000 (recall that originalestimated uncollectible amounts reduce revenue; only estimatesspecific to an individual patient are reported as bad debtexpense).
5. The hospital received capitation premiums of $2,500,000.It estimated that the cost of providing this care was$1,800,000
6. The hospital received payments from third-party payersand direct-pay patients totaling $3,500,000
7. The hospital received contributions of $1,100,000 thatwere restricted by donors for building a new urgent carewing
8. The hospital paid salaries and wages of $4,500,000 incash; these amounts are reported as patient careexpense
9. The fair value of investments required to be held inperpetuity increased by $25,000
10. The hospital received cash from interest and dividendincome of $10,000 on investments without donorrestrictions
11. The hospital used $1,375,000 of net assets with donorrestrictions to construct a new urgent care wing, consistent withthe restrictions created by the donors
12. The hospital reported depreciation expense of$475,000
13. The hospital used drug inventories of$365,000
14. The hospital incurred other operating costs for patientcare of $275,000 on credit
15. The hospital’s beginning of the year trial balance atJanuary 1, 2019 was as follows:

Whitt Valley Presbyterian Hospital

Trial Balance

As of January 1, 2019

	Without DonorRestrictions		With DonorRestrictions
	Debit	Credit	Debit	Credit
Cash	$1,485,000		$401,600
Investments	153,000		40,000
Patient accounts receivable	250,000
Inventory—drugs	401,000
Property, plant, and equipment	4,400,000
Accumulated depreciation		$600,000
Accounts payable		21,000
Net assets, January 1, 2019	-	6,068,000	-	$441,600
	$6,689,000	$6,689,000	$441,600	$441,600