Problem:
For the month of December 2014, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
Required:
Question 1: Prepare the necessary journal entry to record the revenue and receivables.
Question 2: $520,000 of the $2,720,000 was expected to be uncollectible as a bad debt. Prepare the necessary journal entry to record the revenue and receivables.
Question 3: In this month, there were several patients that had no health insurance due to their low income level, the hospital decided that $85,000 of receivables would not be collectible because the patients were indigent. Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.
Question 4: The Hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,710,000. Prepare the necessary journal entry to record the contractual adjustments.
Note: Please explain comprehensively and give step by step solution.