Question

A local private not-for-profit health care entity incurred the following transactions during the current year. Record each of these transactions in appropriate journal entry form. Prepare a schedule calculating the change in unrestricted, permanently restricted, and temporarily restricted net assets. a. The organization’s governing board announced that $160,000 in previously unrestricted cash will be used in the future to acquire equipment. The funds are invested until the purchase eventually occurs. b. Received a donation of $80,000 with the stipulation that all income derived from this money be used to supplement nursing salaries. c. Expended $25,000 for medicines. It received the money the previous year as a restricted gift for this purpose. d. Charged patients $600,000, 80 percent of which is expected to be covered by third-party payors. e. Calculated depreciation expense of $38,000. f. Received interest income of $15,000 on the investments the board acquired in transaction (a). g. Estimated that $20,000 of current accounts receivable from patients will not be collected and that third-party payors will reduce the amounts owed by $30,000 because of contractual adjustments. h. Consumed the medicines acquired in (c). i. Sold the investments acquired in (a) for $172,000. Spent all restricted cash and $25,000 that previously had been given to the organization (with the stipulation that the money be used to acquire plant assets) for new equipment. j. Received pledges

Answer 1

JOURNAL ENTRIES

a) Debit investment $160,000 Credit Unrestricted Cash $160,000

b) Debit Permanent Restrictions cash $80,000 Credit Donations received $80,000

c) Debit Medicine Asset (on hand) $25,000 Credit $25,000 Restricted cash $25,000

d) Debit Accounts receivables $600,000 Credit N.G.O Revenues $600,000

e) Debit depreciation $38,000 Credit Accumulated depreciation $38,000

f) Debit Restricted Cash $15,000 Credit Interest income $15,000

g) NO entry ( estimate and future action)

h) Medicine expense $25000 Credit Medicine asset $25000

i) Debit Restricted Cash $172,000 Credit Investment $160,000, Credit Gain on sale of investment $12,000

Debit Equipment $187000 Credit Restricted cash $187000

j) no entry ( just promises)

UNRESTRICTED CASH

a) investment - 160000

RESTRICTED CASH (TEMPORAL)

c) Medicine -25000

f) Interest +15000

i) sold investment + 172000

= 162000

Restricted cash permanent

b) Donations +80000

Step-by-step explanation:

EQUIPMENT = Temporal restricted cash = 162000+25000 = $187,000

The donation's money is restricted only to donations