BUS 554 01 Happy Hospital IT Group Exercise #2

Recording & Reporting Financial transactions...

BUS 554 01

Happy Hospital IT

Group Exercise #2

Recording & Reporting Financial t

GET THE ANSWER>> https://solutionlly.com/downloads/bus-554-01-happy-hospital-it-
group-exercise-2-recording-reporting-financial-transactions

BUS 554 01

Happy Hospital IT

Group Exercise #2

Recording & Reporting Financial transactions

During fiscal year 2018, Happy Hospital (HH) decides to outsource its information technology
services to another company. By doing this outsourcing, HH will be downsizing certain services
and staff that cost the hospital $175,000 annually. There is an upfront cost to undertaking this
venture, because the company must setup servers, backup systems, and e-mail accounts for
HHL. Additionally, there are annual contract payments that HH must make with the IT Company.
The Board of Directors has agreed to a 4-year contract. The Management contract with the IT
Company requires a $250,000 payment for the initial conversion, and $100,000 per year
afterwards.

The following transactions occurred during the year. Record these transactions as journal
entries and on a general ledger:
1/3
1. HH took out a long-term loan for $3 million and received cash.

2. HH purchased $1 million of medical supplies in inventory on account (hint: Accounts

payable).

3. HH purchased equipment that cost $150,000 on account. The equipment is expected to last
15 years and has no salvage value.

4. $540,865,000 (net of allowances and charity care) was billed for patient services. The
hospital estimates that 5% of these bills will be bad debt. Record the revenue, the receivable
and the bad debt.

5. $875,000 of medical supplies inventory was used.

6. Donations of $400,000 were received in cash. These donations were unrestricted.

7. HH pays in cash for a 2-year malpractice insurance premium at a cost of $5 million. Half of
the premium is for next year, and the other is for the following year.

8. HH pays $560,000 in accounts payable.

9. HH workers earned $259,000,000 in wages for the year. The hospital paid out $282,000,000
in cash. It also paid out $60 million in benefits, all in cash.

10. The equipment purchased in question (3) above was paid for in cash.

11. $370,500,000 from bills sent to patients was received in cash.

12. HH collected $25 million in outstanding patient bills in cash.

13. The Board is concerned that too much debt outstanding is bad for the organization. So they
choose to accelerate their debt payments for the year. HHL paid out $1 million in long-term debt
principal.

14. Depreciation for the year was recorded - $23 million for existing fixed assets. Also, calculate
the new depreciation necessary for the new equipment purchased this year, assuming straight-
line depreciation.

15. The contract with the IT Company is signed. The initial contract cost is paid, as well as the
year 1 payment.

Deliverables:

2/3
 Using these transactions, create the following for HH for 2018.

1- Journal entries- excel template is in this module. Please remember to create the closing entry
to move the final income or loss into net assets. Note this entry must be done after the ledger is
complete.

2- General ledger-excel template is in this module.

3- Balance Sheet- excel template is in this module.

4- Income Statement- excel template is in this module.

GET THE ANSWER>> https://solutionlly.com/downloads/bus-554-01-happy-hospital-it-group-

exercise-2-recording-reporting-financial-transactions

3/3
Powered by TCPDF (www.tcpdf.org)