Your hospital has billed charges of $4,000,000 in February. If your
Collection experience indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent in the third month, and 5 percent in the fourth month, determine the following value:
(a)Net patient revenue for February
(b) Collections of February charges in February
(c) Net accounts receivable at the end of March for February billings
Your hospital has billed charges of $4,000,000 in February. If your collection experience indicates that 20 percent is paid in the month billed, 40 percent in the second month, 20 percent in the third month, and 5 percent in the fourth month, determine the following values:
To calculate the values you need, we will break down the total billed charges and collections for February into separate months using the given collection experience percentages.
Let's start with the calculations:
(a) Net patient revenue for February:
Net patient revenue refers to the amount of revenue derived from the billed charges after accounting for expected collections.
To calculate net patient revenue for February, we need to determine the expected collections for the different months based on the provided collection experience percentages:
Collections in the first month (February): 20% * $4,000,000 = $800,000
Collections in the second month (March): 40% * $4,000,000 = $1,600,000
Collections in the third month (April): 20% * $4,000,000 = $800,000
Collections in the fourth month (May): 5% * $4,000,000 = $200,000
Net patient revenue for February:
$4,000,000 - ($800,000 + $1,600,000 + $800,000 + $200,000) = $1,000,000
So, the net patient revenue for February is $1,000,000.
(b) Collections of February charges in February:
This refers to the amount actually collected in the same month as the charges were billed.
Collections of February charges in February:
20% * $4,000,000 = $800,000
So, the collections of February charges in February amount to $800,000.
(c) Net accounts receivable at the end of March for February billings:
This represents the outstanding amount from the February billings that is yet to be collected at the end of March.
Net accounts receivable at the end of March for February billings:
$4,000,000 - ($800,000) - ($1,600,000) - ($800,000) - ($200,000) = $0
Based on the collection percentages, all the charges billed in February have been collected by the end of March. Therefore, the net accounts receivable at the end of March for February billings is $0.
Please note that these calculations are based on the given collection experience percentages. The actual collections may vary.