Question

The nominal accounts of Boston Clinic for the year ended December 2018 are listed below in alphabetical order Depreciation expense General/administrative expenses Interest expense Investment income Net income Net operating revenues Other revenue Patient service revenue Provision for bad debts Purchased clinic services Salaries and benefits $90,000 70,000 20,000 40,000 10,000 410,000 10,000 440,000 40,000 90,000 170.000 a. Prepare a properly formatted income statement for the year ended December 31, 2018. b. Did Boston Clinic spend $90,000 on new fixed assets during fiscal year 2018? If not, what is the economic rationale behind its reported depreciation expense? c. What is Boston Clinic's total profit margin? d. How can the calculated profit margin (see part c) be interpreted?

Answer 1

Please provide rating..

Answer a)
	Investment income	40,000
	Patient service revenue	440,000
	Other revenue	10,000
	Total revenue		490,000
	Less expenses
	Depreciation expense	$90,000
	General/administrative expenses	70,000
	Interest expense	20,000
	Provision for bad debts	40,000
	Purchased clinic services	90,000
	Salaries and benefits	170,000
	Total expenses		$480,000
	Net income		$10,000
answer b)
	No Bostan clinic does not spent 90000 for new fixed asset. Depreciation is the regular wear and tear for the asset use.
	As the asset value reduced over the period of time and depreciation is that charge/expenses.
answer c)
	Profit Margin = $10000
	Profit margin% = Net income/Total revenue	=10000/490000	2.04%
answer d)	Profit margin is 2.04% of the total revenue. Due to lack of last year data or industry level information we can't conclude that whether this % is good or bad.