21. After it prepares its financial statements, a hospital has historically received malpractice claims for events occurring before the balance sheet date. How should the hospital handle these incurred but not reported (IBNR) claims its financial statements?
a. take no action until it actually receives claims.
b. disclose, in the notes to its financial statements, that it historically receives IBNR claims; state that no estimate can be made of probable loss because no claims have been filed
c. estimate, based on past experience, the amount of probable loss on IBNR claims; report this amount in the notes
d. estimate, based on past experience, the amount of probable loss on IBNR claims; report this amount as an expense and a liability
22. A not-for-profit hospital’s trustees designate $600,000 of the hospital’s unrestricted resources for the future acquisition of equipment. The trustees tell the hospital comptroller to purchase a separate certificate of deposit for it. How should the hospital record and report this investment?
a. as an investment, the resources of which will be designated as restricted in the net assets section of the balance sheet
b. report the investment as “assets limited as to use,” and report $600,000 of net assets as restricted net assets
c. report the investment as “assets limited as to use,” and report $600,000 of net assets as unrestricted net assets
d. report the investment as “restricted” investments and report $600,000 of net assets as restricted net assets
23. A not-for-profit hospital receives a $150,000 donation that must be used for a specific research project. The hospital anticipates that it will undertake the project next year. How should the hospital report the donation?
a. as unrestricted support
b. as temporarily restricted support
c. as assets limited as to use
d. as permanently restricted support
24. A not-for-profit hospital receives a $25,000 donation that must be used for a special training program for nurses. When the donated resources are used for the intended purpose, in which net asset classification should the hospital report the expense?
a. assets limited as to use
b. temporarily restricted net assets
c. unrestricted net assets
d. permanently restricted net assets
25. A governmental hospital receives notice of a $100,000 grant from the federal government to conduct breast cancer research. The grant contains an eligibility requirement; that is, the hospital must incur costs and submit quarterly reports of allowable costs incurred. The reports are subject to audit. When should the hospital recognize revenues under the grant?
a. upon receiving notice of the grant
b. each quarter, when it submits quarterly reports
c. as it incurs allowable costs
d. after the all cost reports have been audited
26. In the statement of operations of a not-for-profit hospital, which of the following increases in net assets is not likely to appear as part of Excess of revenues over expenses?
a. net patient service revenue
b. premium revenue under capitation agreements
c. investment income
d. net assets released from restrictions used for purchase of equipment
27. In the statement of operations of a not-for-profit hospital, which of the following is not likely to be a factor in determining Excess of revenues over expenses?
a. net patient service revenue
b. change in unrealized gains and losses on investments
c. investment income
d. provision for bad debts
28.Which of the following is a major difference between a not-for-profit hospital’s statement of operations and statement of changes in net assets?
a. contributions are not reported in the statement of operations, but are reported in the statement of changes in net assets.
b. net assets released from restrictions are not reported in the statement of operations, but are reported in the statement of changes in net assets.
c. the statement of operations does not cover changes in both unrestricted and restricted net assets, but the statement of changes in net assets does cover changes in both unrestricted and restricted net assets.
d. the statement of operations is not prepared on the cash basis of accounting, but the statement of changes in net assets is prepared on the cash basis of accounting.
29. A group of retired registered nurses decide to volunteer their services to a not-for-profit hospital. They perform a variety of tasks, including: (a) filling in for regular nurses when they are out sick; (b) helping out in food preparation; and (c) selling in the hospital gift shop. For which of the three tasks must donated revenues and expenses be recognized?
a. only task (a)
b. only tasks (a) and (b)
c. all three tasks
d. none of the three tasks
30. Which of the following statements about the form and content of a governmental hospital’s statement of revenues, expenses, and changes in net position is false?
a. nonoperating revenues and expenses are shown separately from operating revenues and expenses
b. capital contributions and endowment contributions are shown separately from operating revenues
c. the statement covers both unrestricted and restricted funds
d. the provision for bad debts is reported as an operating expense
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