Question 1-

The Sydney Hospital provides a range of health care services and its payment terms are net 30 days, meaning payment from patients is due 30 days after their discharge from hospital. Suppose the following transactions take place:

March 5 – Patients receive health care services of $60,000

March 10 – Patients receive health care services of $250,000 on terms of net 30 days.

March 15 – Patients pay $60,000 for health care services received on March 5.

March 30 – hospital pays $50,000 for salaries for work done in March

April 1 -The hospital purchases drugs for $160,000 on terms of net 30 days. In April the hospital uses $35,000 worth of drugs. In May $65,000 of drugs are used and in June $60,000 of drugs are used.

April 6 – Patients receive health care services of $250,000 on terms of net 30 days.

April 7 – phone bill received for $1,000 for telephone services in March.

April 10 – Patients pay $250,000 for services received in March.

April 30 – Hospital pays $55,000 for salaries for work done in April

May 1 – Hospital pays phone bill for $1,000 received on April 7.

May 5 – The hospital pays $160,000 for drugs received in April.

May 6 – Patients pay $250,000 for services received in April.

May 15 – Patients receive health services of $200,000 on terms of net 30 days.

May 30 – Hospital pays $45,000 for salaries for work done in May.

June 5 – Patients receive $55,000 in services and pay for them on the same day.

June 29 – Patients pay $200,000 for services received in May.

June 30 – Hospital pays $40,000 for salaries for work done in June.


a) Calculate this Hospital's profit or loss for each of the months of March, April and May on both a cash accounting and accrual accounting basis. Make sure you show your calculations. You need to do a separate profit and loss statement for each month.

b) What month was the most profitable for the hospital? Explain your answer.

c) Calculate the Hospital's profit or loss for the four months ending June on both a cash accounting and accrual accounting basis. If you get the same answer for both methods explain why this is so. If you get a different answer for the cash and accrual methods explain why this happened.

Question 2-

Items from the Prince Harry Hospital's balance sheet, revenue and expense (income) statement and cash flow statement for the 2014/15 and 2013/14 financial years (ending 30 June) were accidentally listed in alphabetical order as follows:

Accounting   fees13,400970
Audit Fees9,4059,495
Bad & Doubtful Debts0407
Capital Purpose Income271,521339,864
Car   park revenue42,50799,723
Cash   and Cash Equivalents4,536,9853,127,657
Depreciation and Amortisation730,304709,452
Domestic   Service expenses167,802146,659
Drug expenses19,11172,768
Food   expenses239,035237,695
Fuel,   Light, Power and Water146,913123,338
Government Grants3,423,0153,422,197
Insurance costs3,68963,889
Interest and dividends   received92,01263,385
Inventories   of drugs40,13934,333
Lease Expenses80,10978,321
Long term loans240,877174,900
Long term receivables87,76736,478
Maintenance Contracts34,63943,560
Medical expenses80,98277,529
Motor   Vehicle Expenses41,90547,613
Motor vehicles2,0002,000
Non Salary Labour Costs36,56117,644
Other   Administrative Expenses920,244903,036
Other Current Assets20,428108,328
Other current liabilities3,869,0522,753,096
Other revenue821,057683,808
Patient   Fees revenue2,740,2392,510,626
Patient Transport expenses8104,531
Private practice fee revenue286,996306,927
Property,   Plant & Equipment8,293,6278,959,514
Repairs & Maintenance71,23748,672
Salary and wages5,060,5784,887,643
Short   term receivables1,180,8621,310,776
Short term staff benefits1,099,853909,310
Short-term payables326,708698,129
State government grants64,04874,586
Total   equity8,625,3189,043,651
Workcover insurance103,93084,714
Cash flow information
Capital   Grants from Government33,429108,029
Cash   at beginning of period1,243,6261,125,445
Cash   at end of period1,537,9931,243,626
Donations   and Bequests Received33,12838,724
Employee   Expenses Paid5,186,5205,130,345
GST   Received from ATO8,020172
Interest   Received88,72771,150
Non   Salary Labour Costs36,56117,644
Operating   Grants from Government3,487,0633,506,782
Other   Capital Receipts033,296
Other   Receipts692,338810,792
Patient   and Resident Fees Received2,930,7812,257,929
Payments   for Non-Financial Assets63,571264,621
Payments   for Supplies & Consumables1,692,4671,328,683
Proceeds   from sale of Non-Financial Assets032,600

*The cash balances at the beginning and end of the period do not correspond to the figures in the balance sheet as this hospital also holds cash in trust for other organisations and/or individuals.


a. Prepare balance sheets for these two financial years. Arrange these statements like the balance sheets for the Barwon Health that are in the course materials – ie the statements for the two years should be side by side. Make sure to distinguish between current and non-current assets and liabilities.

b. Prepare income (profit and loss) statements for these two years for this hospital.

c. Identify two significant changes that occurred during this period. Do you think that this hospital is in a good position to pay its short term debts? Explain your answer.

d. Prepare a cash flow statement showing operating, investing and financing cash flows for these two financial years.

e. One of the hospital's surplus buildings has a book value of $3 million and it has been offered $5 million for this property. Do you think that the hospital should accept this offer? Explain what factors the management should consider before accepting this offer.

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