Following is a trial balance for Porschen Memorial, a not for profit hospital:
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The hospital uses a General Fund ( GF) and several restricted funds Specific Purpose Funds ( SPF), Endowment Funds ( EF), and Plant Replacement and Expansion Funds ( PREF). During the 2012 2013 fiscal year, the following selected transactions took place. Prepare all the journal entries necessary to record these transactions. Identify the fund and, where appropriate, the net asset classification.
1. Porschen had capitation agreements with several HMO, wherein the HMO agreed to pay monthly premiums per member at the beginning of every month in exchange for Porschen agreement to provide hospital services to the HMO members. Porschen received premiums of $ 2,000,000 in cash during the year. In addition, Porschen billed its self pay patients a total of $ 100,000.
2. Several self pay patient accounts that were classified as uncollectible were written off. These accounts totaled $ 2,000.
3. The MP2 Corporation gave the hospital a grant for research into the use of a voice activated microscope. The grant was for $ 500,000. The entire amount was immediately invested in marketable securities.
4. Operating expenses were incurred as follows:
Nursing and other professional services........ $ 850,000
General expenses ................ $ 300,000
Administrative expenses .............. $ 175,000
Dietary services .................. $ 100,000
Assume that all expenses were incurred on credit.
5. Self pay patient receivables of $ 110,000 were collected.
6. Accounts payable of $ 1,400,000 were paid.
7. Several individuals in the community contributed a total of $ 1,000,000 for the expansion of the burn unit of the hospital. This money was invested in marketable securities until the plans for the unit were completed. The fund was titled the Burn Unit Fund.
8. Debt service of $ 210,000 on the outstanding debt was paid in cash. Of this amount, $ 110,000 was for interest, and the rest was for debt principal.
9. The managing board decided to set aside $ 25,000 in cash from general hospital resources for the development of its professional nursing staff.
10. The construction and planning costs incurred on the new burn unit totaled $ 200,000. This amount was paid from the Burn Unit Fund cash account. To make these payments, investments that originally cost $ 190,000 were sold for $ 205,000. In addition, $ 10,000 in cash income was received on the investments. Assume that (a) the income from the investments has the same restrictions as the original donation and (b) the hospital accounting policy calls for realized and unrealized gains and losses on restricted net assets to be recorded in a single account.
11. During the year, the hospital received $ 25,000 in cash income from the investment of the MP2 grant money. Assume that the investment income is restricted in the same way as the original grant.
12. Research costs associated with the MP2 grant were $ 20,000. These costs were paid with cash generated by the investment of the original grant.
13. Larry Porschen III gave the hospital $ 15,000, which must be maintained intact. The income from the gift can be used in any way the managing board feels is helpful to the hospital. The money was immediately invested in marketable securities.
14. Investments in the Larry Porschen III Fund earned $ 2,000 during the year. Of this amount, $ 1,900 was received in cash.
15. The fair value of the remaining investments in the Burn Unit Fund at the end of the year was $850,000.