Question

please help with 4.27 a

What percentage of one line item is another line item? The formula is: (Line Item of Interest/Base Line Item) x 100. . On the Statement of Operations, you are to calculate each line item (the Item of Interest) as a percentage of TOTAL OPERATING REVENUES(the Base Line Item). . On the Balance Sheel, you are to calculate each line (the Item of Interest) as a percentage of TOTAL ASSETS (Base Line Item). You are responsible for calculating the vertical analysis for 20XL only. PART 3 OF YOUR EXERCISE This portion of your exercise is related to calculating RATIOS: . You will only be required to calculate the CURRENT RATIO, QUICK RATIO, and ACID. TEST RATIO for the YEAR 20X1. • You will find the data you need to calculate the ratios in EXHIBIT 4-27b Balance Sheet for Wakeland Community Hospital, and the formulas and hints are listed below. . Find the benchmark and the desired position in the table on page 185 of your textbook. Be sure to use the permest benchmark for the size of Lake Community Hospital (310 beds). CURRENT RATIO - In calculating this ratio, be sure to use TOTAL CURRENT ASSETS and TOTAL CURRENT LIABILITIES to make your calculation. CURRENT ASSETS CURRENT LIABILITIES QUICK RATIO - In calculating this ratio, consider CASH AND CASH EQUIVALENTS to be the same as CASH+MARKETABLE SECURITIES, and NET RECEIVABLES to be the same as NET PATIENT ACCOUNTS RECEIVALBES. Be sure to use TOTAL CURRENT LIABILITIES. CASH MARKETABLE SECURITIES + NET RECEIVALBES CURRENT LIABILITIES ACID-TEST RATIO - In calculating this ratio, consider CASH AND CASH EQUIVALENTS to be the same as CASH+MARKETABLE SECURITIES, and be sure to use TOTAL CURRENT LIABILITIES CASHE MARKETABLE SECURITIES CURRENT LIABILITES

Answer 1

Percentage change 20x1 - 20x0 is calculated as -

• Percentage change 20x1 - 20x0 = [(Value in 20x1 - Value in 20x0)/Value in 20X0]*100

Example: Percentage change 20x1 - 20x0 for Net patient service revenue is calculated as:

[(225000 - 210000)/210000] * 100 = 7.14%

On Statement of Operations, the 'Percentage of Total Revenues 20x1-20x0' is calculated as -

• Line item of interest/Total operating revenues*100

	20x1	20x0	Percentage change 20x1 - 20x0	Percentage of Total Revenues 20x1-20x0
Revenues
Net patient service revenue	225000	210000	7.14%	97.23%
Other operating Income	6400	5700	12.28%	2.77%
Total operating revenues	231400	215700	7.28%	100.00%
Operating Expenses
Salaries and benefits	124173	110167	12.71%	53.66%
Suppies and other expenses	85000	61000	39.34%	36.73%
Depreciation	12000	11300	6.19%	5.19%
Interest	4500	2500	80.00%	1.94%
Total operating expenses	225673	184967	22.01%	97.53%
Income from operations	5727	30733	-81.37%	2.47%
Non-operating Income
Investment Income/contributions	7500	8500	-11.76%	3.24%
Excess of revenues over expenses	13227	39233	-66.29%	5.72%
Net Income	13227	39233	-66.29%	5.72%

On Balance sheet, the 'Percentage of Total Revenues 20x1-20x0' is calculated as -

• Line item of interest/Total Assets*100

Balance Sheet	20x1	20x0	Percentage change 20x1 - 20x0	Percentage of Total Revenues 20x1-20x0
Cash and cash equivalents	40500	35500	14.08%	9.52%
Net patient account receivables	39500	36400	8.52%	9.29%
Inventories	3800	4000	-5.00%	0.89%
Other Current Assets	6500	5200	25.00%	1.53%
Total Current Assets	90300	81100	11.34%	21.23%
Plant, Property and Equipment
Gross plant, propert and equipment	215000	175500	22.51%	50.55%
(less accumulated depreciation)	-65000	-107000	-39.25%	-15.28%
Net plant, property and equipment	150000	68500	118.98%	35.27%
Funded depreciation/board-designated funds
Cash and short-term investments	185000	110000	68.18%	43.50%
Total Assets	425300	259600	63.83%	100.00%
Current Liabilities
Accounts Payable	14500	8500	70.59%	3.41%
Salaries Payable	4500	3500	28.57%	1.06%
Notes Payable	4300	4500	-4.44%	1.01%
Total Current Liabilities	23300	16500	41.21%	5.48%
Long Term Liabilities
Bonds Payable	60000	27500	118.18%	14.11%
Total Long-term liabilities	60000	27500	118.18%	14.11%
Net assets	342000	215600	58.63%	80.41%
Total liabilities and net assets	425300	259600	63.83%	100.00%

As mentioned in the question, to calculate the ratios following formulas are calculated:

Current Ratio = Total Current Assets/Total Current Liabilities

Quick Ratio = (Cash and Cash Equivalents + Net patient Account Receivable)/Total Current Liabilities

Cash Ratio = Cash and Cash Equivalents/Total Current Liabilities

Selected Liquidity Ratios for 20x1
	Wakeland Community Hospital 20x1	Benchmark*	Desired Position
Current Ratio	3.88	1.71	Above
Quick Ratio	3.43	1.42	Above
Acid-test Ratio	1.74	0.20	Above

*Since the number of beds is given as 301, so the benchmarks are calculated accordingly from the table.