A Private Not-For-Profit Entity Estimated Its Allowance for Contractual Adjustment

question 25

Multiple Choice

A private not-for-profit entity estimated its Allowance for Contractual Adjustment.During the next year,the hospital found that the actual total of contractual adjustments applied to receivables on hand at the end of the previous year was $5,000 higher than the estimate.How should the difference be reported?

• A) The hospital should make a prior period adjustment to retained earnings for $5,000.
• B) The hospital should reduce current period net patient service revenues for the $5,000.
• C) The hospital should record a current period expense for the $5,000.
• D) The hospital should record a "cumulative effect of a change in accounting principle" for the $5,000.

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