Question

PREPARING FOR THE MEETING To prepare for the meeting with the bank, Dr. Amsted asked Mr. Weber to construct both an operating statement and a balance sheet using the accrual method. The operating statement would be for the entire calendar year, whereas the balance sheet would be as of December 31. The accountants had provided Mr. Weber with a worksheet (Exhibit 2) to use in preparing the two statements. They also had given him their assessment of some of the account balances as of December 31. These are shown in Table B of Exhibit 1. With this information in hand, Mr. Weber began to prepare a set of financial statements on an accrual basis. Assignment 1. Using an accrual system, prepare an operating statement for the year and a balance sheet as of December 31. What do these statements tell you about BOGA's profitability? 2. In the absence of the bank's stipulation that accrual be used, which type of system-modified cash or accrual — would you recommend that Dr. Amsted use for BOGA? Why?

1. Using an accrual system, prepare an operating statement for the year and a balance sheet as of December 31. What do these statements tell you about BOGA’s profitability?

2. In the absence of the bank’s stipulation that accrual be used, which type of system—modified cash or accrual—would you recommend that Dr. Amsted use for BOGA? Why?

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Answer 1

solution:-

1) operating statement for the year ended 2020

operating statement

for the calendar year 2020

notes

revenue profession services less : allowances and bad debts Net revenue evpenses: physician payments Administrative wages Benefits medical supplies Rent utilities billing/collection fees Equipment depereciation office expense Liability insurance Contracted services other Contribution to dean Total expenses Surplus (deficit )

$6347900 $1269580 $5078320 $1124000 $684000 $293200 $95200 $436000 $507832 $24000 $50000 $952185 $106000 $45000 $558615 $4876032 $202287

2) Balance sheet as on 31 December ,2020

	as on31 december	notes
Assets cash Accounts receivable Medical supply inventory prepaid insurace Total current assets Equipment (net) Total assets Liabilities and Equit Liabilities bank loan (line of credit ) accounts payable payable to dean Total current liabilities Notes payable Equity Start up contribution Retained earning Total liabilities and equity	$110000 $183116 $125000 $250000 $2316167 $1250000 $5882334 $75000 $1301 $205104 $630000 $202287 $103739 not given $202287 $1239678

2) accrual basis is gives a correct picture for that particular financial year therefore accural basis is far better than modified cash basis .