Choice "C" is correct. The amount reported as unrestricted revenues, gains and other support on the statement of activities of a not-for-profit hospital would include all income earned by the hospital and any amounts released from restriction. Charity care, those health care services provided but never expected to result in cash flows to the hospital, are not recorded as receivable or as revenue. Charity care is not recognized on the face of the financial statements but is disclosed. Revenues, gains and other support is computed as follows:
| |
|---|
| Net patient service revenue (including charity care) | $ 500,000 |
| Less: Charity care | (100,000) |
| Plus: Other revenue | 80,000 |
| Plus: Net assets released from restrictions used for used for operations | 50,000 |
| Unrestricted revenues, gains and other support | $ 530,000 |
Choice "b" is incorrect. The amount represented by this selection ($460,000) is the amount properly recognized as total revenues, gains and other support ($530,000) net of bad debt expense of $70,000. Bad debt expense is recognized as an expense, not as a contra revenue.Choice "a" is incorrect. The amount represented by this selection ($580,000) is the total patient service revenue including charity care ($500,000) and other revenue (80,000), exclusive of net assets released from restrictions. This amount does not represent the total to be recognized as revenues, gains and other support.
Choice "d" is incorrect. The amount represented by this selection ($630,000) is the amount properly recognized as total revenues, gains and other support ($530,000) plus charity care of $100,000. Charity care is improperly included and should not be recognized.
