A Hospital Corporation Contracted with a Private Company to Collect

question 149

Essay

A hospital corporation contracted with a private company to collect fees and maintain health facilities that adjoin their property.Users of the health facility can pay cash of $10 for a daily visit or they can purchase a pass.The pass has a magnetic strip that is swiped through the entrance device each time an individual enters the facility.This subtracts daily fee from the pass balance for each day used.The passes are issued for a fee of $365, which are good for 365 days.Refunds are not issued on the pass.Last year $18,650 was collected for daily visits, $438,000 of annual passes were issued, and $206,225 of pass usage was registered on the scanning equipment.How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

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Definitions:

Restricted Contribution

A donation given to a nonprofit organization with specific conditions attached as to how it can be spent.

Net Asset Balance

The total assets minus total liabilities of a company, showing the net book value of the company's equity.

Restricted Fund Method

An accounting method used by not-for-profit organizations to distinguish between resources that are restricted by donor-imposed stipulations and those that are not.

Internally Restricted

Funds or assets within an organization that are designated for a specific purpose by the entity's management, not external restrictions.