The Adelaide Hospital provides a range of health care services and the following transactions took place between March and June: 

 March 1 – paid rent in advance for the months of March, April, May and June – $16,000 

 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 28 – Pays rent of $16,000 in advance for the months of July, August, September and October. 

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

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

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Required: 

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. Explain why these calculations are different. (6 marks) 

b) What month was the most profitable for the hospital? Explain your answer. If the hospital had $45,000 in its bank account on March 1, how much would it have in the bank on 30 June? (3 marks) 

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. (3 marks) 

d) As a manager of a healthcare facility what financial figures would you find the most useful – those done on a cash basis or those done on an accrual basis? Explain your answer. (3 marks) 

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Question 2 (15 marks) 

Items from the Wagga Wagga Hospital’s balance sheet, revenue and expense (income) statement and cashflow statement for the 2016/17 and 2017/18 financial years (ending 30 June) were accidentally listed in alphabetical order as follows: 

2018 2017 

Accounting fees 13,400 970 

Audit Fees 9,405 9,495 

Bad & Doubtful Debts 0 407 

Capital Purpose Income 271,521 339,864 

Car park revenue 42,507 99,723 

Cash and Cash Equivalents 4,536,985 3,127,657 

Depreciation and Amortisation 730,304 709,452 

Domestic Service expenses 167,802 146,659 

Drug expenses 19,111 72,768 

Food expenses 239,035 237,695 

Fuel, Light, Power and Water 146,913 123,338 

Government Grants 3,423,015 3,422,197 

Insurance costs 3,689 63,889 

Interest and dividends received 92,012 63,385 

Inventories of drugs 40,139 34,333 

Lease Expenses 80,109 78,321 

Long term loans 240,877 174,900 

Long term receivables 87,767 36,478 

Maintenance Contracts 34,639 43,560 

Medical expenses 80,982 77,529 

Motor Vehicle Expenses 41,905 47,613 

Motor vehicles 2,000 2,000 

Non-Salary Labour Costs 36,561 17,644 

Other Administrative Expenses 920,244 903,036 

Other Current Assets 20,428 108,328 

Other current liabilities 3,869,052 2,753,096 

Other revenue 821,057 683,808 

Patient Fees revenue 2,740,239 2,510,626 

Patient Transport expenses 810 4,531 

Private practice fee revenue 286,996 306,927 

Property, Plant & Equipment 8,293,627 8,959,514 

Repairs & Maintenance 71,237 48,672 

Salary and wages 5,060,578 4,887,643 

Short term receivables 1,180,862 1,310,776 

Short term staff benefits 1,099,853 909,310 

Short-term payables 326,708 698,129 

State government grants 64,048 74,586 

Superannuation 399,074 399,131 

Total equity 8,625,318 9,043,651 

Workcover insurance 103,930 84,714 4 

Cash flow information 

2018 2017 

Capital Grants from Government 33,429 108,029 

Cash at beginning of period 1,243,626 1,125,445 

Cash at end of period 1,537,993 1,243,626 

Donations and Bequests Received 33,128 38,724 

Employee Expenses Paid 5,186,520 5,130,345 

GST Received from ATO 8,020 172 

Interest Received 88,727 71,150 

Non-Salary Labour Costs 36,561 17,644 

Operating Grants from Government 3,487,063 3,506,782 

Other Capital Receipts 0 33,296 

Other Receipts 692,338 810,792 

Patient and Resident Fees Received 2,930,781 2,257,929 

Payments for Non-Financial Assets 63,571 264,621 

Payments for Supplies & Consumables 1,692,467 1,328,683 

Proceeds from sale of Non-Financial Assets 0 32,600 

*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. 

Required: 

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 – i.e. 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. What were the main liquid assets of the hospital in these two financial years? What were the main short-term debts of the hospital in these two financial years? Do you think that this hospital is in a good position to pay its short-term debts? Explain your answer. 

d. Prepare a cashflow statement showing operating, investing and financing cashflows for these two financial years. 

e. One of the hospital’s surplus buildings has a book value of $3 million and it received an offer of $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. 

3 marks for each section