Question

If an investor-owned hospital receives donations whose use is restricted, the cash must be reported as a restricted item on the balance sheet in the equity section. T/F

Answer 1

True. If an investor-owned hospital receives donations whose use is restricted, the cash must be reported as a restricted item on the balance sheet in the equity section.

Step-by-step explanation:

True. If an investor-owned hospital receives donations whose use is restricted, the cash must be reported as a restricted item on the balance sheet in the equity section. This is because the hospital cannot freely use those funds for any purpose, as they have specific donor restrictions.

For example, if the donations are specifically intended to be used for research or capital improvements, the hospital must honor those restrictions and keep the cash separate from its general funds. By reporting it as a restricted item, the hospital provides transparency to its stakeholders about the specific purpose of the funds.