Under Lennon Hospital’s rate structure, it earned patient service revenue of $9 million for the year ended December 31, 2010. However, Lennon did not expect to collect this entire amount because it deemed $1.4 million to be charity care and estimated contractual adjustments to be $800,000.
During 2010, Lennon purchased medical supplies from Harrison Medical Supply Company at a cost of $4,000. Harrison notified Lennon that it was donating the supplies to the hospital.
At the end of 2010, Lennon had board-designated assets consisting of cash of $60,000 and investments of $800,000.
Lennon is a private not-for-profit organization: How much should Lennon record as patient service revenue and how much as net patient service revenue? How should Lennon record the donation of the supplies? How are the board-designated assets shown on the balance sheet?
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