Reference no: EM131060627

Question 1-

The Sydney Hospital provides a range of health care services and its payment terms are net 30 days, meaning payment from patients is due 30 days after their discharge from hospital. Suppose the following transactions take place:

• March 5 - Patients receive health care services of $60,000
• March 10 - Patients receive health care services of $250,000 on terms of net 30 days.
• March 15 - Patients pay $60,000 for health care services received on March 5.
• March 30 - hospital pays $50,000 for salaries for work done in March
• April 1 -The hospital purchases drugs for $160,000 on terms of net 30 days. In April the hospital uses $35,000 worth of drugs. In May $65,000 of drugs are used and in June $60,000 of drugs are used.
• April 6 - Patients receive health care services of $250,000 on terms of net 30 days.
• April 7 - phone bill received for $1,000 for telephone services in March.
• April 10 - Patients pay $250,000 for services received in March.
• April 30 - Hospital pays $55,000 for salaries for work done in April
• May 1 - Hospital pays phone bill for $1,000 received on April 7.
• May 5 - The hospital pays $160,000 for drugs received in April.
• May 6 - Patients pay $250,000 for services received in April.
• May 15 - Patients receive health services of $200,000 on terms of net 30 days.
• May 30 - Hospital pays $45,000 for salaries for work done in May.
• June 5 - Patients receive $55,000 in services and pay for them on the same day.
• June 29 - Patients pay $200,000 for services received in May.
• June 30 - Hospital pays $40,000 for salaries for work done in June.

Required:

a) Calculate this Hospital's profit or loss for each of the months of March, April and May on both a cash accounting and accrual accounting basis. Make sure you show your calculations. You need to do a separate profit and loss statement for each month.

b) What month was the most profitable for the hospital? Explain your answer.

c) Calculate the Hospital's profit or loss for the four months ending June on both a cash accounting and accrual accounting basis. If you get the same answer for both methods explain why this is so. If you get a different answer for the cash and accrual methods explain why this happened.

Question 2-

Items from the Prince Harry Hospital's balance sheet, revenue and expense (income) statement and cash flow statement for the 2014/15 and 2013/14 financial years (ending 30 June) were accidentally listed in alphabetical order as follows:

	2015	2014
Accounting fees	13,400	970
Audit Fees	9,405	9,495
Bad & Doubtful Debts	0	407
Capital Purpose Income	271,521	339,864
Car park revenue	42,507	99,723
Cash and Cash Equivalents	4,536,985	3,127,657
Depreciation and Amortisation	730,304	709,452
Domestic Service expenses	167,802	146,659
Drug expenses	19,111	72,768
Food expenses	239,035	237,695
Fuel, Light, Power and Water	146,913	123,338
Government Grants	3,423,015	3,422,197
Insurance costs	3,689	63,889
Interest and dividends received	92,012	63,385
Inventories of drugs	40,139	34,333
Lease Expenses	80,109	78,321
Long term loans	240,877	174,900
Long term receivables	87,767	36,478
Maintenance Contracts	34,639	43,560
Medical expenses	80,982	77,529
Motor Vehicle Expenses	41,905	47,613
Motor vehicles	2,000	2,000
Non Salary Labour Costs	36,561	17,644
Other Administrative Expenses	920,244	903,036
Other Current Assets	20,428	108,328
Other current liabilities	3,869,052	2,753,096
Other revenue	821,057	683,808
Patient Fees revenue	2,740,239	2,510,626
Patient Transport expenses	810	4,531
Private practice fee revenue	286,996	306,927
Property, Plant & Equipment	8,293,627	8,959,514
Repairs & Maintenance	71,237	48,672
Salary and wages	5,060,578	4,887,643
Short term receivables	1,180,862	1,310,776
Short term staff benefits	1,099,853	909,310
Short-term payables	326,708	698,129
State government grants	64,048	74,586
Superannuation	399,074	399,131
Total equity	8,625,318	9,043,651
Workcover insurance	103,930	84,714

 

Cash flow information
	2015	2014
Capital Grants from Government	33,429	108,029
Cash at beginning of period	1,243,626	1,125,445
Cash at end of period	1,537,993	1,243,626
Donations and Bequests Received	33,128	38,724
Employee Expenses Paid	5,186,520	5,130,345
GST Received from ATO	8,020	172
Interest Received	88,727	71,150
Non Salary Labour Costs	36,561	17,644
Operating Grants from Government	3,487,063	3,506,782
Other Capital Receipts	0	33,296
Other Receipts	692,338	810,792
Patient and Resident Fees Received	2,930,781	2,257,929
Payments for Non-Financial Assets	63,571	264,621
Payments for Supplies & Consumables	1,692,467	1,328,683
Proceeds from sale of Non-Financial Assets	0	32,600

*The cash balances at the beginning and end of the period do not correspond to the figures in the balance sheet as this hospital also holds cash in trust for other organisations and/or individuals.

Required:

a. Prepare balance sheets for these two financial years. Arrange these statements like the balance sheets for the Barwon Health that are in the course materials - ie the statements for the two years should be side by side. Make sure to distinguish between current and non-current assets and liabilities.

b. Prepare income (profit and loss) statements for these two years for this hospital.

c. Identify two significant changes that occurred during this period. Do you think that this hospital is in a good position to pay its short term debts? Explain your answer.

d. Prepare a cash flow statement showing operating, investing and financing cash flows for these two financial years.

e. One of the hospital's surplus buildings has a book value of $3 million and it has been offered $5 million for this property. Do you think that the hospital should accept this offer? Explain what factors the management should consider before accepting this offer.