Week 2: Connection to the Real World (Balance Sheet and Income Statement)
Complete Assignment Exercise 11-2 Components of a Balance Sheet and Income Statement on pages 542–545.
Assignment Exercise 11–2: Components of Balance Sheet and Income Statement Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in the MHS Case Study appearing in Chapter 33. Patient accounts receivable of $7,400,000 is shown as net of $1,300,000 allowance for bad debts (8,700,000 2 1,300,000 5 7,400,000). (1) What percentage of gross accounts receivable is the allowance for bad debts? (2) If the allowance for bad debts is raised to $1,500,000, where does the extra $200,000 go?
Rubric
Week 2 Homework Assignment
| Week 2 Homework Assignment | ||
| Criteria | Ratings | Pts |
| This criterion is linked to a Learning OutcomeStudent has provided complete and thorough responses to Exercise 11-2, Part 1. Show the allowance for bad debt. | 10 ptsFull Marks0 ptsNo Marks | 10 pts |
| This criterion is linked to a Learning OutcomeStudent has provided complete and thorough responses to Exercise 11-2, Part 2. Show the allowance for bad debt and where does the extra funds go. | 10 ptsFull Marks0 ptsNo Marks | 10 pts |
| This criterion is linked to a Learning OutcomeStudent has provided complete and thorough responses to Exercise 11-2Quality work will be free of any spelling, punctuation, or grammatical errors. Sentences and paragraphs will be clear, concise, and factually correct. | 10 ptsFull Marks0 ptsNo Marks | 10 pts |
Assignment Exercise 11–1: Components of Balance Sheet and Statement of Net Income
Refer to the Metropolis Health System (MHS) financial statements contained in Appendix 33-A. Use the MHS comparative balance sheet, statement of revenue and expenses, and statement of fund balance for this assignment.
Required
Identify the following MHS balance sheet components. List the name of each component and its amount(s) from the appropriate MHS financial statement.
Current Liabilities
Total Assets
Income from Operations
Accumulated Depreciation
Total Operating Revenue
Current Portion of Long-Term Debt
Interest Income
Inventories
Doctors Smith and Brown: Statement of Net Income for the Three Months Ended March 31, 2___
Revenue
Net patient service revenue 180,000
Other revenue -0-
Total Operating Revenue 180,000
Expenses
Nursing/PA salaries 16,650
Clerical salaries 10,150
Payroll taxes/employee benefits 4,800
Medical supplies and drugs 15,000
Professional fees 3,000
Dues and publications 2,400
Janitorial service 1,200
Office supplies 1,500
Repairs and maintenance 1,200
Utilities and telephone 6,000
Depreciation 30,000
Interest 3,100
Other 5,000
Total Expenses 100,000
Income from Operations 80,000
Nonoperating Gains (Losses) Interest Income -0-
Nonoperating Gains, Net -0-
Net Income 80,000
Doctors Smith and Brown Balance Sheet March 31, 2___
Assets
Current Assets
Cash and cash equivalents 25,000
Patient accounts receivable 40,000
Inventories—supplies and drugs 5,000
Total Current Assets 70,000
Property, Plant, and Equipment
Buildings and Improvements 500,000
Equipment 800,000
Total 1,300,000
Less Accumulated Depreciation (480,000)
Net Depreciable Assets 820,000
Land 100,000
Property, Plant, and Equipment, Net 920,000
Other Assets 10,000
Total Assets 1,000,000
Liabilities and Capital
Current Liabilities
Current maturities of long-term debt 10,000
Accounts payable and accrued expenses 20,000
Total Current Liabilities 30,000
Long-Term Debt 180,000
Less Current Portion of Long-Term Debt (10,000)
Net Long-Term Debt 170,000
Total Liabilities 200,000
Capital 800,000
Total Liabilities and Capital 1,000,000
Doctors Smith and Brown Statement of Changes in Capital for the Three Months Ended March 31, 2___
Beginning Balance $720,000
Net Income 80,000
Ending Balance $800,000
Example 11A: Components of Balance Sheet and Income Statement
The “Accounts Receivable (net)” in Exhibit 11–1 means the accounts receivable figure of $250,000 on the balance sheet is net of the allowance for bad debts. If the allowance for bad debts is raised on the balance sheet, then bad debt expense (a.k.a. provision for doubtful accounts) on the income statement (a.k.a. statement of revenue and expense) also rises. Think of these two accounts as a pair.
Practice Exercise 11–II: Components of Balance Sheet and Income Statement
Refer to Doctors Smith and Brown’s balance sheet, where patient accounts receivable is stated at $40,000. Do you think this figure is net of an allowance for bad debts?
Assignment Exercise 11–2: Components of Balance Sheet and Income Statement
Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in the MHS Case Study appearing in Chapter 33. Patient accounts receivable of $7,400,000 is shown as net of $1,300,000 allowance for bad debts (8,700,000 2 1,300,000 5 7,400,000). (1) What percentage of gross accounts receivable is the allowance for bad debts? (2) If the allowance for bad debts is raised to $1,500,000, where does the extra $200,000 go?
Example 11B: Components of Balance Sheet and Income Statement
Refer to Exhibit 11–1 and Exhibit 11–2’s Westside Clinic statements. The “Property, Plant, and Equipment (net)” total in Exhibit 11–1 means the property, plant, and equipment figure of $360,000 on the balance sheet is net of the reserve for depreciation. If the reserve for depreciation is raised on the balance sheet, then the depreciation expense on the income statement (a.k.a. statement of revenue and expense) also rises. Think of these two accounts as another pair.
Practice Exercise 11–III: Components of Balance Sheet and Income Statement
Refer to Doctors Smith and Brown’s balance sheet, where buildings and equipment are both stated as net (the $820,000 figure), but land is not. Do you recall why this is so?
Assignment Exercise 11–3: Components of Balance Sheet and Income Statement
Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in the MHS Case Study appearing in Chapter 33. Property, plant, and equipment of $19,300,000 is shown as “net,” meaning net of the reserve for depreciation. If the $19,300,000 is reduced by $200,000 (meaning the reserve for depreciation has risen), what happens on the income statement?
