I cannot figure out the GAAP and the relevance of each GAAP that is being used to create the financial plan for Patton-Fuller Hospital. I did complete the following budget projections necessary to help answer the question

Patton-Fuller Community Hospital
Statement of Revenue and Expense
2009 to 2010 Operating Budget

Complete the Operating Budget. Assume the 2009 projections were realized. Use the 2009 budget and the 2010 budget assumptions to calculate expenses and income for 2010. The revenues have been completed for you.

2009 (Proj) 2010 Budgeted % Change From 2009 Projection 2010 Budget 2010 Operating Budget Assumptions
Revenue Based on these 2009 assumptions: a 3% overall deflation rate for prices in 2009—due to the weak economy—will continue into 2010.
Net patient revenue 459,900 3% 473,697 Patient revenue will continue to increase, but at a decreased rate, with little or no increase in patient volume, due to new managed care contracts.
Other revenue 3,082 15% 3,544 Marketing's plan to increase donations by 15%
Total revenue 462,982 3% 477,241



2009 (Proj) 2010 Budgeted % Change From 2009 Projection 2010 Budget 2010 Operating Budget Assumptions
Expenses
Salaries and benefits 220,752 1% 222,960 Salaries will hold to a 1% overall increase in cost due to price deflation nationwide, with no increase in labor hours, due to no increase in patient volume. This assumption could be affected by a board decision either to raise nursing wages by $1 per hour or to increase the nursing hour ratio.
Supplies 74,584 -3% 72,347 Supplies cost will decrease 3% due to the price deflation and our current over-stock purchased last year.
Physician and professional fees 110,376 3% 113,687 Contracts for fees have a built-in 3% increase.
Utilities 1,200 5% 1,260 Utilities cost will increase to the rising cost of oil partially offset by the efficiency of the hospital's new heating and cooling systems.
Other 1,840 0% 1,840 No net change in the cost or volume of these items.
Depreciation & amortization (noncash expenses) 36,036 0% 36.036 Some high-cost equipment—air conditioning, telephone system, all patient beds, and headwalls—were replaced in 2009, and depreciation rose sharply. Depreciation will remain at this level in 2010.
Interest 3,708 30% 4,820 The repayment plan for any monies borrowed in 2009 will come due in 2010, with a sharp increase in interest cost.
Provision for doubtful accounts 13,797 10% 15,177 The renegotiation of managed care plans has delayed collection and made collections less certain.
Total expenses 462,293 1% 468,127 Total expenses will rise 1%



2009 (Proj) 2010 Budgeted % Change From 2009 Projection 2010 Budget 2010 Operating Budget Assumptions
Income
Operating income 689 -33% 459 Operating Income will improve, with the hospital's loss reduced by 2/3.
Loss (nonoperating income)
Investment income (62) 0% (62) The market is down, expected to hold steady; a zero-return is expected, with neither losses nor gains.
Net income 627 -37% 397 The hospital will continue its dramatic turnaround, taking advantage of the stagnation in patient volume, price deflation, the efficiency of new equipment, and the improved arrangements with the managed care companies.

To understand the GAAP (Generally Accepted Accounting Principles) and their relevance in the financial plan for Patton-Fuller Hospital, let's break down the information provided:

GAAP refers to a set of accounting standards and guidelines that companies must follow when preparing their financial statements. These standards ensure consistency, comparability, and reliability in financial reporting.

In the case of Patton-Fuller Hospital, the use of GAAP is crucial for presenting accurate and reliable financial information to stakeholders, including investors, creditors, and regulators. It helps to ensure transparency and allows for meaningful analysis of the hospital's financial position and performance.

Now, looking at the budget projections provided:

1. Revenue:
- Net patient revenue: The projected revenue for patient services, taking into account a 3% overall deflation rate for prices due to the weak economy in both 2009 and 2010.
- Other revenue: The projected increase in donations by 15%, as part of the marketing plan.

2. Expenses:
- Salaries and benefits: Expected to have a 1% overall increase in cost due to nationwide price deflation, with no increase in labor hours. There is a possibility of a board decision to raise nursing wages by $1 per hour or increase the nursing hour ratio.
- Supplies: Projected to decrease by 3% due to price deflation and the use of overstock purchased in the previous year.
- Physician and professional fees: Contracts for fees have a built-in 3% increase.
- Utilities: Costs will increase by 5% due to the rising cost of oil, partially offset by the efficiency of the hospital's new heating and cooling systems.
- Other: No net change in the cost or volume of these items.
- Depreciation & amortization (noncash expenses): Expected to remain at the 2009 level due to the replacement of high-cost equipment and the associated increase in depreciation.
- Interest: The repayment plan for any borrowed funds in 2009 will lead to a sharp increase in interest cost in 2010.
- Provision for doubtful accounts: Expected to increase by 10% due to the renegotiation of managed care plans, which might delay collection and make collections less certain.

3. Income:
- Operating income: Expected to improve with the hospital's loss reduced by 2/3.
- Loss (nonoperating income):
- Investment income: Expected to hold steady with zero return, neither losses nor gains anticipated due to the market being down.

By following these GAAP-based budget projections, Patton-Fuller Hospital can present a reliable and transparent financial plan that adheres to accounting principles and provides stakeholders with accurate information about its financial performance and operations.

To understand the relevance of GAAP (Generally Accepted Accounting Principles) in the financial plan for Patton-Fuller Hospital, we need to analyze the budget projections and how they align with specific GAAP principles. Here are the steps to assess the relevance of GAAP in this scenario:

1. Familiarize yourself with GAAP principles: GAAP is a set of accounting rules and standards used to prepare and present financial statements. These principles ensure the consistency and comparability of financial information across different organizations.

2. Review the budget projections: Take a closer look at the budget projections provided for the hospital's revenue and expenses in 2009 and the projected changes for 2010.

3. Analyze revenue projections: The revenue projections indicate that net patient revenue is expected to increase by 3% in 2010 despite a 3% deflation rate in prices. This suggests that GAAP's relevance lies in accurately measuring and reporting revenue recognition in accordance with the matching principle. The hospital is recognizing revenue based on services provided, taking into account contractual terms and estimates of uncollectible amounts (provision for doubtful accounts).

4. Analyze expense projections: The expense projections outline various categories such as salaries and benefits, supplies, physician fees, utilities, and more. Review each category to assess their relevance to GAAP.

- Salaries and benefits: The projection indicates a 1% increase, which aligns with GAAP's principle of recognizing and reporting expenses when incurred and reasonably estimable.

- Supplies: The projection reflects a 3% decrease due to overstock and price deflation. This suggests that the hospital is valuing supplies at the lower of cost or market value, following GAAP's principle of conservatism.

- Physician and professional fees: The projection includes a 3% increase based on contractual terms, indicating adherence to GAAP's principle of accurately reporting expenses associated with services provided.

- Utilities: The projection includes a 5% increase due to rising oil prices, which aligns with GAAP's principle of recognizing and reporting expenses when incurred and reasonably estimable.

- Other expenses: These expenses are projected to remain unchanged, indicating adherence to GAAP's principle of consistency and the matching principle.

- Depreciation & amortization: The projection states that depreciation will remain at the same level in 2010, indicating adherence to GAAP's principle of recognizing and allocating expenses over the useful life of assets.

- Interest: The projection shows a 30% increase in interest costs, reflecting the repayment plan for borrowed funds. This aligns with GAAP's principle of recognizing and reporting interest expenses over the borrowing period.

- Provision for doubtful accounts: The projection includes a 10% increase in the provision due to delays in collections. This indicates that the hospital is recognizing and reporting estimated bad debt expenses in accordance with GAAP's principle of conservatism.

5. Assess the relevance of GAAP to the overall budget: The budget projections overall demonstrate adherence to GAAP principles by recognizing and reporting revenue and expenses accurately, consistently, and in alignment with the matching principle and the principle of conservatism.

In summary, GAAP's relevance in the financial plan for Patton-Fuller Hospital lies in ensuring the proper recognition, measurement, and reporting of revenue and expenses, while following key accounting principles. The hospital's adherence to GAAP principles enhances the reliability and comparability of its financial information.