Healthcare Finance #2

Which of the following statements about cash versus accrual accounting is most correct? Select one: a.In cash accounting, an event is recognized when a cash transaction occurs. b. In accrual accounting, an event is recognized when a cash transaction occurs. c. Most large healthcare organizations use cash accounting because it best represents the economic status of the organization. d. Most small healthcare organizations use accrual accounting because it closely matches statements required for income tax purposes. e. In cash accounting, an event is recognized when the obligation for a cash transaction is created.

a.In cash accounting, an event is recognized when a cash transaction occurs.

The requirement to provide financial accounting information is driven by the need for outside stakeholders (primarily investors) to have reliable information about the financial status of an organization. Select one: a.True b. False

a.True

Which of the following equations best describes the accounting identity? Select one: a. Long-term assets = Short-term assets + Equity. b. Assets = Liabilities + Equity. c. Total claims = Liabilities + Equity. d. Short-term assets = Cash + Receivables. e. Long-term liabilities = Notes + Bonds.

b. Assets = Liabilities + Equity

Generally Accepted Accounting Principles provide an exact answer to every accounting question, leaving no opportunity for negotiation, compromise, or interpretation in the preparation and presentation of financial statements. Select one: a. True b. False

b. False

Which of the following statements concerning the statement of cash flows is most correct? Select one: a. Like the balance sheet, the statement of cash flows is as of a single point in time. b. The statement of cash flows uses information from both the income statement and the balance sheet. c. The statement of cash flows has five major sections. d. The most important line on the statement of cash flows is the "bottom line," the net increase (decrease) in cash. e. None of the above statements is correct. Feedback

b. The statement of cash flows uses information from both the income statement and the balance sheet.

As of December 31, 2011, employees of Brookdale Senior Living were owed $150,000 for work performed in 2011. The $150,000 appeared in Brookdale's 2011 income statement as salaries expense and in Brookdale's 2011 balance sheet as salaries payable. In January 2012, when the salaries were paid, the effect of the transaction was to Select one: a. reduce salaries expense by $150,000 and reduce cash by $150,000 b. reduce salaries payable by $150,000 and reduce cash by $150,000 c. increase salaries payable by $150,000 and reduce equity by $150,000 d. reduce equity by $150,000 and reduce cash by $150,000 e. None of the above statements is correct.

b. reduce salaries payable by $150,000 and reduce cash by $150,000

Which of the following statements concerning depreciation expense is most correct? Select one: a. Depreciation expense accounts for the loss of value of inventory. b. Depreciation expense accounts for the loss of value of securities investments. c. Depreciation expense accounts for the loss of value of fixed assets (property and equipment). d. For accounting purposes, depreciation expense is calculated by the double-declining-balance method. e. For accounting purposes, depreciation expense is calculated by the triple-declining-balance method.

c. Depreciation expense accounts for the loss of value of fixed assets (property and equipment).

Assume Mercy Hospital uses accrual accounting. Which of the following statements is(are) most correct? Select one: a. Supplies expense is recognized when medical supplies are delivered to the hospital by the vendor. b.Patient service revenue is recognized when payment is received by the hospital from a patient's third-party payer. c. Salaries expense is recognized when payroll checks are written. d.Patient service revenue is recognized when healthcare services are provided. e. Answers (a), (c), and (d) are correct.

d.Patient service revenue is recognized when healthcare services are provided.

Which of the following would most likely appear as a liability on the balance sheet of a healthcare organization? Select one: a. Interest payments made by the healthcare organization on an outstanding loan b. The outstanding balance on a loan taken by the healthcare organization c. Salaries owed to employees but not paid as of the balance sheet date d.The current market value of investments in stocks and bonds owned by the healthcare organization e. Answers (b) and (c)

e. Answers (b) and (c)

Which of the following would most likely appear as an asset on the balance sheet of a healthcare organization? Select one: a.Salaries owed to employees but not paid as of the balance sheet date b.Equipment purchased during the accounting period to be used over the next five years c.The outstanding balance on a loan taken by the healthcare organization d.The current market value of investments in stocks and bonds owned by the healthcare organization e.Answers (b) and (d)

e.Answers (b) and (d)