Important: You must show all calculations and explain how you got all your answers. For example, suppose a question asks what the profit will be in a particular month and you put “$50,000”. Even if this is correct you will receive no marks if you do not show how you got the answer.

Important: You must show all calculations and explain how you got all your answers. For example, suppose a question asks what the profit will be in a particular month and you put “$50,000”. Even if this is correct you will receive no marks if you do not show how you got the answer.

There is generally no need for footnotes or references. If you quote or refer to sources this must be acknowledged. It is essential that the work is your own.

QUESTION 1 (8 Marks)

Several transactions are listed below. What impact do they have on assets, liabilities and owner’s equity – ie do they result in an increase or decrease in assets, liabilities and owner’s equity? You need to explain how you got your answer – to do this you need to specify what accounts would have been affected.

Patient services are provided for cash
Medical equipment is purchased on credit
Payment is made for the equipment purchased on credit
Money is received from patients for services provided last month
Land is bought for $2 million – $1 million is paid from the hospital’s cash account and $1 million from borrowings from a bank.
A telephone account is received and recorded: payment will be made later.
Salaries are paid in cash
Dividends are paid to shareholders.

QUESTION 2 (5 Marks)

The profit and loss statement for the year ended 30 June 2016 for the Randwick Private Hospital shows a loss of $10 million. But from the balance sheet you observe that cash on hand as at 30 June 2015 was $4.3 million and as at 30 June 2016 was $8.4 million. Give three possible reasons why the hospital could report a loss for the year while its cash balances increased.

Explanation & Answer

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