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

question 97

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 $ 4,000 higher than the estimate. How should the difference be reported?

• A) The hospital should record a current period expense for the $4,000.
• B) The hospital should record a "cumulative effect of a change in accounting principle" for the $4,000.
• C) The hospital should reduce current period net patient service revenues for the $4,000.
• D) The hospital should make a prior period adjustment to retained earnings for $4,000.

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Definitions:

Plea Bargaining

The process by which the accused and the prosecutor in a criminal case work out a mutually satisfactory disposition of the case, subject to court approval. Usually, plea bargaining involves the defendant's pleading guilty to a lesser offense in return for a lighter sentence.

Petty Larceny

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Grand Larceny

A serious theft crime involving the unlawful taking of property that exceeds a specific value, defined by law.

Pretrial Motions

Requests filed by parties to a lawsuit before the trial begins, aiming to resolve certain issues and set the trial conditions.