HAC Healthcare Accounting Financial Reporting & Analysis 3

Question 1

ASU 2014-09 (ASC 606) changed healthcare revenue recognition primarily by requiring hospitals to:

Accepted Answer

Estimate the transaction price including variable consideration at contract inception

Answer

ASC 606 requires healthcare entities to estimate variable consideration (including contractual adjustments and implicit price concessions) at contract inception to determine the transaction price.

Question 2

Which of the following is classified as a non-operating revenue item on a hospital's income statement?

Accepted Answer

Investment income on an endowment fund

Answer

Investment income on endowment funds is a non-operating revenue item because it arises from financial activities rather than the hospital's core healthcare delivery operations.

Question 3

In a hospital's statement of cash flows using the indirect method, depreciation is added back to net income because:

Accepted Answer

It is a non-cash expense that reduced net income but did not use cash

Answer

Depreciation is a non-cash expense; it reduces net income on the income statement but involves no cash outflow, so it must be added back under the indirect method.

Question 4

A hospital reports $50M in gross patient revenue, $20M in contractual adjustments, and $2M in charity care. Net patient service revenue is:

Accepted Answer

$28M

Answer

Net patient service revenue equals gross charges minus contractual adjustments minus charity care: $50M - $20M - $2M = $28M.

Question 5

The 'cushion ratio' in healthcare financial analysis measures:

Accepted Answer

Unrestricted cash and investments relative to annual debt service

Answer

The cushion ratio equals unrestricted cash, investments, and board-designated funds divided by maximum annual debt service, indicating how many times liquid assets cover debt obligations.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Healthcare Accounting Financial Reporting & Analysis 3