EX. 13-3 Although universities may be characterized by transactions not typically engaged in by other types of entities, most can be accounted for within the framework applicable to not-for-profit organizations in general.

Windom College, a not-for-profit institution, engaged in the following transactions during its fiscal year ending June 30, 2014. Prepare appropriate journal entries, indicating the types of funds (by restrictiveness) in which they would be recorded.

1. The college collected $86,400,000 in student tuition. Of this amount $6,000,000 was applicable to the summer semester, which ran from June 1 to August 30, and $400,000 was applicable to the fall semester that began the following September.

2. It received a contribution of $1,000,000 in stocks and bonds to establish an endowed chair in chemistry. Income from the chair must be used to supplement the salary of a professor of chemistry.

3. During the year, the chemistry chair endowment earned interest and dividends of $50,000, all of which was used to supplement the salary of the chair holder.

4. The fair value of the investments of the chemistry chair endowment declined by $80,000.

5. Using funds restricted for this purpose, the college purchased $150,000 of equipment for intercollegiate athletics. Intercollegiate athletics is accounted for as an auxiliary enterprise. The college charged depreciation of $30,000.

6. The annual alumni campaign yielded $1,800,000 in pledges. The college estimated that 2 percent would be uncollectible. During the year the college collected $1,500,000 on the pledges.    

P. 13-6
Is there a sound reason for accounting for contributions to a private not-for-profit university differently from a public (government) university?

In January 2015, Kirkland University receives a pledge of $200,000, to be used exclusively to support research in a specialized area of communication disorders. The university’s fiscal year ends on July 31.

In December 2015 (the following fiscal year), Kirkland receives the pledged contribution of $200,000 and spends $150,000 on qualifying research.

1. Prepare all required journal entries to reflect the trans- actions described. Indicate the type of fund in which the entries would be made.
     a. Assume first that Kirkland is a private, not-for-profit university.
     b. Assume instead that Kirkland is a public university and that it elects to be accounted for (i) as a govern- ment engaging exclusively in business-type activities and (ii) as a full-service government that accounts for the contribution in a governmental fund.

2. On what grounds, if any, can you justify different principles of accounting for the same transaction depending on type of institution (public or private) or assumption as to type of public institution? 

EX. 14-3
The basis for recognizing patient care revenue is not always obvious.

In a particular month Northwest Medical Clinic reported the following:

1. It provided direct care services to patients, billing them $400,000. Of this amount it received $120,000 in cash, but as a consequence of bad debts it expects to collect a total of only $330,000.

2. It provided direct care to patients covered by insurance and who are members of various group health plans for which, at standard rates, it would have billed $650,000. However, owing to contractual arrangements with the payers it actually billed them for, and expects to collect, only $480,000.

3. It provided charity care for which it would have billed, at standard rates, $82,000.

4. It received capitation fees of $1,400,000 from health care plans and provided services to members of those plans for which it would have billed, at standard rates, $1,600,000.

Prepare appropriate journal entries to recognize revenue.

EX. 14-5
Patient revenue in a health care organization are derived from multiple sources.

Prepare journal entries for the following transactions.

1. Mt. Helen hospital billed the state Medicaid program $365,000 for services provided at its standard billing rate. The prospective payment system gives Medicaid a 38 percent discount from these rates.

2. The hospital has an arrangement with an HMO to provide hospital care to the HMO’s members at a specific rate per member, per month. In April the HMO paid the hospital $425,000 per agreement for patients treated in March. Based on pre-established billing rates, the hospital would have billed the HMO $487,500.

3. The hospital provided services to patients under ‘‘char- ity care’’ which amounted to $1,315,000 for the year.

4. At its standard billing rates Mt. Helen hospital pro- vided services to Amity Inc., a third-party payer, for $2,380,000. The retrospective billing arrangement with Amity Inc. stipulates that the hospital would receive payment at an interim rate of 85 percent of its established rates, subject to retrospective adjustment based upon agreed-upon allowable costs. By end of the fiscal year, Amity Inc. had paid all the billings. Before issuing its financial statements, the hospital estimated that it would need to refund $192,000 to Amity Inc., based on allowable costs. 

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