The nominal accounts of South Orlando Nursing Home Inc. for the year ended December 2018 are...
The nominal accounts of South Orlando Nursing Home Inc. for the year ended December 2018 are listed below in alphabetical order:
|
Depreciation |
$ 80,000 |
|
Insurance and other |
300,200 |
|
Interest |
190,000 |
|
Medical supplies and drugs |
920,400 |
|
Other revenue |
110,564 |
|
Patient service revenue |
3,274,258 |
|
Provision for bad debt |
120,000 |
|
Provision for income taxes |
96,377 |
|
Salaries and benefits |
1,498,860 |
a. Prepare a properly formatted income statement for the year ended December 31, 2018.
b. How does this income statement differ from the one presented in Problem 1?
c. What is South Orlando Nursing Home’s total profit margin?
d. Why might South Orlando Nursing Home’s before tax profit margin be a better measure of expense control when comparing an investor-owned business with a not-for-profit business?
.
Homework Answers
Income statement for the 31 Dec 2018
Patient service Revenue 3,274,258
Other Revenue 110,564
Less : Medical supplies and drugs 920,400
Less : Depreciation 80,000
Less : Insurance 300,200
Less : Interest 190,000
Less : Salaries and benefits 1,498,860
Less : Provision for bad debt 120,000
Profit Before tax 275,362
Less : Provision for Income tax 96,377
Profit Margin 178,985
(b) The Income statement presented in problem 1 is in alaphabetical order whereas we have computed profit margin as per the income statement.
(c) Total Profit margin is 178,985.
(d) It is a better measure of expense control as we can identify the profit margin. And that profit can be reinvested in business, whereas Not for profit describes a type of organisation that does not earn profit for its owners. All of the money earned by or donated to is used in persuing the non profit organisation objectives.
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