ASSESSMENT EXERCISE 1Place Student
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PART 1 of 2
Transaction Exercise
Background:
Emma Care is a non-profit home care agency operating in the suburbs of Toldeo Ohio.
Below is a list of their accounts, with the 12/31/21 Beginning Balance and a list of 15 subsequent transactions for January 2022.
1.1) Use the spreadsheet below to record each of the 15 transactions into their proper accounts.
Remember:
Each Transaction must touch at least two accounts and the balance between Assets, Liabilities & Net Assets must be maintained
Revenues are “positive” values as they serve to increase Net Assets, and Expenses are “negative” values that serve to reduce Net Assets
Accumulated Depreciation is a “contra” (negative) Asset
Estimated Uncollectible (Bad Debts) serve to reduce (negative) both Revenue and Accounts receivable
Make sure the Total Assets on the Balance Sheet equal the sum of Total Liabilities and Total Net Assets (line 63 & 75).
Emma Care
Journal and Ledger
Assets
For the Month ending 1/31/22
Liabilities
1
$4,500
Bought additional inventory on credit
2
$230,000
Provided patient care services on credit
3
$3,000
Record estimated uncollectible AR (Bad Debt)
4
$9,000
Consumed supplies from inventory
5
$5,000
Bought & used additional supplies with cash
6
$12,000
Wrote check to pay last months invoices from AP
7
$235,000
Deposited checks collected from Patient AR
8
$130,000
Record payroll expenses incurred, not yet paid
9
$1,000
Paid Electric bill by check (not previously accrued)
10
$75,000
Paid Bank loan installment ($5k is interest)
11
$35,000
Purchased Car with new 5 year financing terms
12
$15,000
Wrote checks to pay for general expenses (not
previously accrued)
13
$130,000
Wrote checks to pay wages previously accrued
14
$20,000
Record Depreciation Expense on PP&E
15
$5,000
Purchased Shares of Amazon for investment
Ending Balance 1/31/22
Gross AR
uncollectable
Inventory
Accum.
Deprec.
Accounts
payable
Wages
Payable
LT debt
Net Assets
W/O restric.
Revenue
Patient
Revenue Bad
Debt
Expenses
Wages
Expenses
Supplies
Expenses
General
Expenses
Interest
Expenses
Deprec.
60,000
(4,500)
13,000
42,000
880,000
(90,000)
42,000
8,000
680,000
181,000
0
0
0
0
0
0
0
10,500
60,000
(4,500)
13,000
42,000
880,000
(90,000)
42,000
8,000
680,000
181,000
0
0
0
0
0
0
0
0
0
0
$181,000
0
0
0
0
0
0
0
0
0
0
0
0
LT Investment Gross PP&E
Revenue – Bad Debts = Net Revenue
Less: Total Expense
Income from operations (move to net assets)
Adjusted Net Assets w/o Restriction
Emma Care
Balance Sheet
Assets
Current Assets
Cash
Gross accounts receivable
less: allowances for uncollectible
Net Accounts Receivable
Inventory
total current assets
Non-Current Assets
LT investments
Gross PP&E
Less: Accumulated depreciation
Net PP&E
Total Assets
Liabilities and Net Assets
Current Liabilities
Accounts payable
Wages & other current liabilities
total current liabilities
Non-Current Liabilities
Long term debt
Total Liabilities
Net Assets
Net Assets without restriction
total net assets
Total Liabilities and Net Assets
Emma Care
Statement of Operations
For the Month ended January 31
Revenues
Patient revenue
Less: Bad Debts
total net revenue
Expenses
labor expense
supply expense
general expense
interest expense
depreciation
total expense
Excess of Revenues over Expenses
Emma Care
Statement of Cash Flows
For the Month ended January 31
Cash Flow from Operations:
Change in Net Assets
Depreciation
Provision for Bad Debts
Decrease in AR
Decrease in Inventory
Decrease in AP
Increase in wages payable
Net Cash from Operating Activities
Cash Flow from Investing:
Purchase of Investments
Purchase of PPE
Net Cash from Investing Activities
Cash Flow from Financing:
Payment of Long Term debt
Proceeds from issuance of LTD
Net Cash from Financing Activities
Net Change in Cash
Beginning Cash
Ending Cash
Net Assets
Cash
10,500
estimated
Transactions (Accrual Basis)
Beginning Balances 12/31/21
Check to make sure that Total Assets = Liabilities + Net Assets
12/31/2021 1/31/2022
$10,500
$60,000
($4,500)
$55,500
$13,000
$79,000
$10,500
$60,000
($4,500)
$55,500
$13,000
$79,000
$42,000
$880,000
($90,000)
$790,000
$911,000
$42,000
$880,000
($90,000)
$790,000
$911,000
$42,000
$8,000
$50,000
$42,000
$8,000
$50,000
$680,000
$730,000
$680,000
$730,000
$181,000
$181,000
$911,000
$181,000
$181,000
$911,000
2022
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
2022
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$10,500
$10,500
0
0
PART 2 of 2
For Questions 2.1 – 2.8
Memorial Health System (MHS) is negotiating the purchase of Dr. Robert Vasqualies practice. He has been successf
years and is ready to retire. MHS has agreed to pay Robert $1,000,000 for his practice. MHS hired an appraisal firm
$850,000 to the building and $75,000 to the land. They have valued the office equipment (including furniture) at $
pharmaceutical and supply inventory. The remaining $50,000 would be assigned to Goodwill. MHS’s practice acqui
following details. The Director of Outpatient Clinical Operations has agreed to keep Dr. Vasqualies staff and will ass
Facilities staff estimate an additional $30,000 will be needed for cosmetic renovations and new signage. The IT staf
capital cost will be needed to upgrade the computer systems to be compatible with those being used by all other M
would run a $5,000 multi-media advertising campaign to announce the ownership change and introduce the new p
the organization’s policy is to use straight line depreciation and they would assign a 25 year life to the building, 10
furnishings, 5 years for IT hardware and software and 15 years for renovations. Salvage value would be assigned on
standard rate of 10% of the building’s acquisition cost. MHS policy is to capitalize expenditures that exceed $1,000
than 1 year. The goodwill would be reviewed for impairment annually. MHS uses FIFO for its inventory accounting
Both Dr. Vasqualies and the Board of MHS, must approve the final deal before it can be signed.
2.1)
If this project is fully completed as planned (and financed entirely with new debt), what is the
amount of Assets to be recorded on the Balance Sheet of MHS?
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2.2)
If this project is fully completed as planned, what is the total amount of Gross Property, Plant
Equipment to be recorded on the Balance Sheet of MHS?
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2.3)
From the information provided, what is MHS’s total required investment (expenditure) for this
project?
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2.4)
Calculate the first full years annual depreciation expense for this project.
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2.5)
Calculate the Net Book Value of Total PP&E from this project to appear on the Balance Sheet
third full year of operation.
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If the negotiated cost of the project changed and the assigned life of various components we
2.6) that the annual depreciation were to become $45,000, what would the project’s Accumulated
at the end of 5 full years of operation?
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2.7)
If after 5 years, MHS wants to sell the building and move the practice and equipment back to
campus, what would be the Fair Market Value price of the building at that time? Explain your
2.8)
MHS is meeting with their property insurance agent. Which of the following options for insuri
acquired fixed assets from this project would generate the greatest insurance premium cost?
a Replacement value
b Acquisition Cost
c Salvage value
d Book value
2.09) Under the accrual basis of accounting, Revenue is recognized when…
a The checks clear the bank
b The checks are deposited
c The checks are received
d The services are performed
2.10)
Which financial statement best explains why the cash balance in the checking accoun
only $2,500 when the reported profit for the period was $33,000.
a Balance Sheet
b Statement of Operations
c Statement of Cash Flows
d Income Statement
2.11)
With regard to financial reporting, which of the following is the most challenging when
Accounting concept of “Realization”?
a Investment portfolio of Publicly traded stocks
b Certificates of deposit
c Equipment book Value
d Accounts Receivable
e Bank Debt
2.12) Revenue has what affect on the organizations Net Assets?
a Increases
b Decreases
c Has no impact
d Depends upon the type of revenue
How many hours do you estimate it took to complete this assignment?
ctice. He has been successfully practicing family medicine for 45
MHS hired an appraisal firm that has assigned a fair market value of
nt (including furniture) at $24,000 and $1,000 for his combined
dwill. MHS’s practice acquisition team has pulled together the
Vasqualies staff and will assign a new provider to the office.
nd new signage. The IT staff at MHS projects $15,000 in additional
se being used by all other MHS providers. The Marketing staff
ge and introduce the new provider. The finance department advises
year life to the building, 10 years for office equipment and
value would be assigned only to the cost of the building at the
ditures that exceed $1,000 and have an operational life of greater
or its inventory accounting and operates on a calendar year basis.
signed.
h new debt), what is the total
of Gross Property, Plant and
nt (expenditure) for this
ect.
r on the Balance Sheet at the end of the
arious components were adjusted such
project’s Accumulated Depreciation be
and equipment back to the hospital
hat time? Explain your answer.
owing options for insuring their newly
surance premium cost?
n the checking account increased by
ost challenging when it comes to the
ment?
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