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| 1.
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Which of the following is true about health care organizations? |
| | A) | Governmentally-owned health care organizations follow GASB pronouncements and typically use the modified accrual basis of accounting. |
| | B) | Private not-for-profit hospitals follow FASB pronouncements for not-for-profit organizations and use the accrual basis of accounting. |
| | C) | A profit-seeking health care organization is subject to FASB pronouncements, including FASB 116 and 117. |
| | D) | Basic accounting and financial reporting differ greatly between governmentally-owned and private not-for-profit health care organizations. |
| | E) | All of the above are true |
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| 2.
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Which of the following is appropriately classified as a health care organization? |
| | A) | individual practice associations |
| | B) | emergency care facilities |
| | C) | health maintenance organizations |
| | D) | alcohol rehabilitation centers |
| | E) | all of the above |
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| 3.
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Which of the following would NOT be considered a health care organization by the AICPA Audit and Accounting Guide: Health Care Organizations? |
| | A) | an AIDS clinic supported primarily by contributions from donors |
| | B) | a governmentally-owned hospital |
| | C) | a drug rehabilitation center supported primarily by patient revenues |
| | D) | a nursing home funded by patient revenues and insurance providers |
| | E) | C and D |
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| 4.
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Which of the following is true about a governmental health care organization? |
| | A) | The organization follows GASB standards and generally reports as a special purpose entity engaged only in business-type activities. |
| | B) | The organization follows GASB standards and the Statements written by FASB that apply only to not-for-profit entities. |
| | C) | Governmental health-care organizations use modified accrual and the current financial resources measurement focus. |
| | D) | The organization would prepare a statement of cash flows with four categories of activities. |
| | E) | Both A and D are correct |
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| 5.
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The AICPA Audit and Accounting Guide: Health Care Organizations applies to which of the following health care organizations? |
| | A) | Marion County Hospital |
| | B) | All Saints Catholic Hospital |
| | C) | Serenity Nursing Home (a for-profit organization) |
| | D) | all of the above |
| | E) | none of the above |
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| 6.
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Which of the following must be excluded from the performance indicator for a health care organization? |
| | A) | patient revenues |
| | B) | parking lot revenues |
| | C) | receipt of restricted contributions |
| | D) | investment income for current unrestricted purposes |
| | E) | all of the above must be included in the performance indicator |
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| 7.
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The Audit and Accounting Guide indicates that a health care organization must report a performance indicator that reports results from continuing operations. Which of the following must NOT be included in the performance indicator? |
| | A) | Transactions with owners, other than in exchange for services |
| | B) | Transfers among affiliated organizations |
| | C) | Foreign currency translation adjustments |
| | D) | Unrealized gains and losses on available-for-sale securities |
| | E) | All of the above |
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| 8.
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What is a capitation agreement, and how should it be reported in the operating statement of a private not-for-profit hospital? |
| | A) | An agreement that limits the amount of deductibles patients have to pay themselves; reported as an expense in the operating statement |
| | B) | An agreement with a third-party payor based on number of individuals covered, rather than on services provided; revenues from the agreement should be reported separately in the operating statement |
| | C) | An agreement with an insurance company that reduces the amount the company pays to a health care provider for covered services; reported in the operating statement as a contra revenue |
| | D) | An agreement with an insurance company that reduces the amount the company pays to a health care provider for covered services; reported in the operating statement as an operating expense |
| | E) | none of the above |
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| 9.
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In the current month, a private not-for-profit hospital performed medical services for patients worth $660,000. The hospital expects the amount ultimately collected to be $460,000. The $200,000 difference is comprised of: contractual adjustments with third-party payors of $110,000; estimated uncollectible accounts of $60,000; and charity care of $30,000. How much net patient service revenue should be reported for the month? |
| | A) | $520,000 |
| | B) | $550,000 |
| | C) | $630,000 |
| | D) | $490,000 |
| | E) | $460,000 |
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| 10.
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Which of the following would be classified as unrestricted in a private not-for-profit hospital? |
| | A) | physician services expense |
| | B) | assets whose use is limited |
| | C) | contributions from a donor to be spent for any purpose in the following fiscal year |
| | D) | contributions from donors to be spent for cancer research in the current period |
| | E) | Both A and B |
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| 11.
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Hillman Hospital is a private not-for-profit hospital. At the end of 2006, it estimated that contractual adjustments related to amounts not yet collected from third-party payors would be $4,500,000. During 2007, it determined that the actual amount of contractual adjustments was $4,700,000. How should Hillman account for the $200,000 difference? |
| | A) | The financial statements for 2006 must be restated to correct this error. |
| | B) | The difference should be treated as a change in accounting estimate; the financial statements from 2006 should not be restated. |
| | C) | An expense must be recorded in 2007 for the amount of the difference. |
| | D) | The financial statements for 2006 should not be restated, but the financial statements for 2007 should include a prior period adjustment. |
| | E) | None of the above |
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| 12.
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Which of the following would NOT be an acceptable title for a financial statement in a private not-for-profit health care organization? |
| | A) | Statement of Operations |
| | B) | Statement of Revenues, Expenditures, and Changes in Net Assets |
| | C) | Statement of Financial Position |
| | D) | Statement of Cash Flows |
| | E) | All of the above are acceptable |
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| 13.
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Which of the following is true about financial reporting for health care organizations? |
| | A) | GASB requires that the Statement of Cash Flows for a governmentally-owned hospital must be prepared using the direct method. |
| | B) | The financial statement titles are identical for governmentally-owned and private not-for-profit health care organizations. |
| | C) | The net asset classifications for governmentally-owned health care organizations are unrestricted, temporarily restricted, and permanently restricted. |
| | D) | Governmentally-owned health care organizations use the modified accrual basis of accounting. |
| | E) | None of the above is true |
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| 14.
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Miller Hospital is a successful stockholder-owned for-profit hospital. Which of the following is true? |
| | A) | Because the hospital is for-profit, it does not follow the provisions of the AICPA Health Care Guide |
| | B) | Because the hospital is for-profit, it is not subject to the provisions of FASB 116, 117, and 124. |
| | C) | The equity section of the hospital's balance sheet would contain Retained Earnings and Paid-In Capital |
| | D) | Both B and C are true |
| | E) | All of the above are true |
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| 15.
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Stiles Hospital, a private not-for-profit hospital, purchased diagnostic equipment at a cost of $1,000,000. The hospital paid $100,000 cash out of unrestricted funds and signed a note for the remaining $900,000. Which of the following is true? |
| | A) | The hospital may choose to record the equipment as temporarily restricted or unrestricted. |
| | B) | The Net Assets of the hospital would reflect "Invested in Capital Assets, Net of Related Debt" of $100,000. |
| | C) | The hospital may choose not to depreciate the equipment if it reclassifies a portion of it to unrestricted assets each year. |
| | D) | All of the above statements are true. |
| | E) | None of the above statements is true. |
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| 16.
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According to FASB, what is the fundamental difference between a health care organization and a voluntary health and welfare organization (VHWO)? |
| | A) | To be considered a health care organization, there must be at least one physician on staff; this is not required for a VHWO. |
| | B) | A health care organization intends to recover a significant part of its costs through operating revenues; a VHWO survives primarily on contributions. |
| | C) | A health care organization provides a limited number of services; a VHWO typically provides a wider variety of services. |
| | D) | A hospital serves paying customers; VHWO's do not charge fees of their customers or clients. |
| | E) | All of the above are true. |
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| 17.
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Which of the following is true about charity care in a hospital? |
| | A) | Any hospital that provides charity care would be subject to FASB's Statements that apply to not-for-profit organizations. |
| | B) | If a hospital provides charity care, it must be considered a voluntary health and welfare organization. |
| | C) | Charity care services are shown on the financial statements as an expense. |
| | D) | All of the above are true. |
| | E) | None of the above is true. |
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| 18.
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Which of the following would NOT be classified as operating revenue for a health care organization? |
| | A) | Gift shop revenues |
| | B) | Income on investments of endowment funds |
| | C) | Parking garage revenues |
| | D) | Premium revenue from capitation agreements |
| | E) | All of the above are classified as operating revenue |
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| 19.
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Burnes Hospital made the following journal entry at its year end:
| | Debit | Credit | | Investments | 1,200 | | | Net Realized and Unrealized Losses on Investments — Permanently Restricted | 500 | | | Net Realized and Unrealized Gains on Investments — Temporarily Restricted | | 1,700 |
The explanation for this entry is |
| | A) | The hospital purchased $1,200 in new investments and sold $1,700 in current investments. |
| | B) | Temporarily restricted investments declined in value by $1,700, while permanently restricted investments increased in value by $500. |
| | C) | The hospital purchased investments worth $1,700 but only paid $1,200 for them. |
| | D) | The market value of temporarily restricted investments increased by $1,700, while the market value of permanently restricted investments decreased by $500. |
| | E) | none of the above |
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| 20.
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Which of the following is NOT true about the operating statement for a private not-for-profit health care organization? |
| | A) | A performance measure must be shown. |
| | B) | The statement may be entitled Statement of Operations and presented along with a Statement of Changes in Net Assets. |
| | C) | Operating revenues are limited to patient revenues and premium revenues. |
| | D) | It must show the restriction reclassifications for the period. |
| | E) | all of the above are true |
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| 21.
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Which of the following is included in the performance indicator of a hospital, according to the Health Care Guide? |
| | A) | equity transfers from another entity |
| | B) | tuition revenues |
| | C) | investment returns restricted by donors |
| | D) | accounting changes |
| | E) | extraordinary items |
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| 22.
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How should a health care organization report charity care? |
| | A) | charity care should be debited to a contra revenue account, thus reducing net patient service revenue |
| | B) | charity care is not recorded in patient service revenue |
| | C) | the organization must disclose management's policy for providing charity care and the level of charity care provided |
| | D) | charity care is recorded as an expense |
| | E) | both B and C |
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| 23.
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How are expenses reported in the operating statement by a private health care entity? |
| | A) | By natural classifications (salaries, supplies, utilities, etc.) |
| | B) | By functional classifications (professional care of patients, general services, etc.) |
| | C) | By net asset class |
| | D) | A or B |
| | E) | none of the above |
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| 24.
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Hampton Hospital used cash restricted by donors for plant acquisition to build a wing to the hospital. How should this building expansion be accounted for? |
| | A) | as unrestricted |
| | B) | as permanently restricted |
| | C) | as temporarily restricted, with reclassifications recorded in accordance with the depreciation schedule |
| | D) | either A or B |
| | E) | either A or C |
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| 25.
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How does a private not-for-profit hospital account for uncollectible patient accounts receivable? |
| | A) | when revenues are recorded, they are reduced by an amount equal to the estimated uncollectibles. |
| | B) | estimated uncollectible patient accounts are recorded as a contra revenue. |
| | C) | by recording bad debt expense and an allowance for the uncollectible accounts |
| | D) | either B or C |
| | E) | none of the above |
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| 26.
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Mills Hospital, a private not-for-profit hospital, provided services to patients on account in the amount of $200,000. Mills estimated that the contractual adjustments associated with these services would be $18,000. What entry should Mills prepare to record this information? |
| | A) | Debit Patient Accounts Receivable for $182,000 and Contractual Adjustments for $18,000; Credit Operating Revenues — Unrestricted — Patient Service Revenue for $200,000 |
| | B) | Debit Patient Accounts Receivable for $182,000 and credit Operating Revenues — Unrestricted — Patient Service Revenue for $182,000 |
| | C) | Debit Patient Accounts Receivable for $182,000 and Contractual Adjustments Expense for $18,000; Credit Operating Revenues — Unrestricted — Patient Service Revenue for $200,000 |
| | D) | Debit Patient Accounts Receivable for $200,000 and Credit Operating Revenues — Unrestricted — Patient Service Revenue for $200,000 |
| | E) | None of the above |
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| 27.
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Mills Hospital, a private not-for-profit hospital, paid salaries and benefits for nurses, using a gift that had been restricted for that purpose. How should this transaction be recorded? |
| | A) | with a debit to Operating Expenses — Salaries and Benefits and a credit to Cash |
| | B) | with a debit to Reclassification from Temporarily Restricted Net Assets — Expiration of Time Restrictions and a credit to Reclassification to Unrestricted Net Assets — Expiration of Time Restrictions |
| | C) | with a debit to Reclassification from Temporarily Restricted Net Assets — Satisfaction of Program Restrictions and a credit to Reclassification to Unrestricted Net Assets — Satisfaction of Program Restrictions |
| | D) | both A and B |
| | E) | Both A and C |
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