Question

Under Lennon Hospital’s rate structure, it earned patient service revenue of $9.6 million for the year ended December 31, 2017. However, Lennon did not expect to collect this entire amount because it deemed $1.70 million to be charity care and estimated contractual adjustments to be $860,000.

During 2017, Lennon purchased medical supplies from Harrison Medical Supply Company at a cost of $4,600. Harrison notified Lennon that it was donating the supplies to the hospital.

Lennon is a private not-for-profit entity:

1. How much should Lennon record as patient service revenue? (Enter your answer in millions rounded to 2 decimal places.)

2. How much should Lennon record as net patient service revenue? (Enter your answer in millions rounded to 2 decimal places.)

3. How should Lennon record the donation of the supplies? (Enter your answer in dollars not in millions.)

Answer 1

How much should Lennon record as patient service revenue? (Enter your answer in millions rounded to 2 decimal places.) Patient Service Revenue = Initial patient revenue - Charity Care = $9.6 million - $1.7 million = $7.90 million. How much should Lennon record as net patient service revenue? (Enter your answer in millions rounded to 2 decimal places.) Patient Service Revenue = Patient Service Revenue - Contractual Adjustment = $7.9 million - $860k = $7.04 million. How should Lennon record the donation of the supplies? (Enter your answer in dollars not in millions.) $4,600 donation of the supplies.