Question 1

A dental practice has fiscal year revenues of $850,000 and expenses of $520,000. The practice's net income for that fiscal year is $330,000.

Accepted Answer

The net income is calculated by subtracting the total expenses ($520,000) from the total revenues ($850,000), which equals $330,000.

Question 2

Which of the following can be used to legally reduce the amount of federal income tax withheld from an employee's pay?
A) group disability insurance
B) group life insurance
C) direct deposits to a healthcare insurance account
D) direct deposits to pay for health club membership

Accepted Answer

Direct deposits to a healthcare insurance account, such as a Health Savings Account (HSA) or Flexible Spending Account (FSA), can reduce taxable income, thereby legally reducing the amount of federal income tax withheld from an employee's pay. These accounts are designed for healthcare expenses and offer tax advantages.

Question 3

Income statements must be prepared ____.
A) annually
B) quarterly
C) monthly
D) by a certified public accountant

Accepted Answer

Income statements are typically prepared annually, although some companies may choose to prepare them quarterly or monthly.

Question 4

A medical laboratory supervisor has been spending 20 hours per week working in the lab as a technologist because of a staffing shortage. If she work more than 40 hours per week, the laboratory ____.
A) pays no overtime because she is an exempt employee
B) pays overtime only if she puts in more than 40 hours of technologist work
C) pays overtime of 1.5 times her supervisor salary
D) pays overtime of 1.5 times a technologist's salary

Accepted Answer

Exempt employees, such as supervisors, typically do not receive overtime pay regardless of the number of hours worked because they are salaried and meet certain criteria exempting them from overtime pay under labor laws.

Question 5

A medical partnership has been owned by the same four physicians since it began. They took out a loan when the practice opened but have not needed any other loans. Which pattern of Liquidity Ratios, Solvency Ratios, and Profit Level Ratios would indicate continual financial improvement of the partnership?
A) decreasing; decreasing; decreasing
B) decreasing; increasing;, increasing
C) increasing; decreasing; increasing
D) increasing; increasing; increasing

Accepted Answer

Liquidity Ratios, Solvency Ratios, and Profit Level Ratios would all be increasing if the partnership is continually improving financially.

Question 6

Two physical therapists own a partnership and receive draws each month for the medical services they provided. The draws should be recorded as business expenses.

Accepted Answer

Draws to owners are considered owner withdrawals and should be recorded as a reduction of equity, not as a business expense.

Question 7

Which of the following is a non-exempt employee?
A) factory foreman
B) computer programmer
C) waitress
D) salesperson

Accepted Answer

Non-exempt employees are typically hourly workers who are eligible for overtime pay under the Fair Labor Standards Act (FLSA). A waitress falls into this category, as they are usually paid hourly and qualify for overtime. Factory foremen, computer programmers, and certain salespersons may be classified as exempt, depending on their specific job duties and salary.

Question 8

A physical therapist has a standard charge of $100 for a back therapy session. A patient makes a co-payment of $20 at the time of service. His insurer sends a payment of $50. Which accounting entry for that payment is correct?
A) Accounts Receivable $80 credit
B) Accounts Receivable $50 credit
C) Medical Services Revenue $50 debit
D) Medical Services Revenue $20 debit

Accepted Answer

The total charge for the session is $100. The patient pays $20, and the insurer pays $50, totaling $70. The remaining $30 is still owed, so the correct entry is to credit Accounts Receivable by $80 ($50 from the insurer and $30 still owed).

Question 9

The largest expense category for most healthcare organizations is ____.
A) debt repayment
B) employee salaries and benefits
C) supplies
D) computer hardware and software

Accepted Answer

Employee salaries and benefits typically represent the largest expense category for most healthcare organizations, as healthcare is a labor-intensive industry requiring a wide range of skilled professionals.

Question 10

Bad debt expense is ____.
A) the cost of sending repeat bills to a non-paying customer
B) the cost of hiring a collection agency
C) the amount of revenue due that is written off as uncollectible
D) the penalties paid for making late payments on loans or bills

Accepted Answer

Bad debt expense represents the amount of revenue that is recognized as uncollectible and is written off, reflecting the loss to the company from extending credit that will not be repaid.

Question 11

The full charge for a medical service is $180. The group healthcare insurer pays $100 for that service. Which of the following is a correct way to record the $80 difference?
A) Accounts Receivable $80 debit
B) Medical Services Revenue $80 credit
C) Medical Services Revenue $80 debit
D) Cash Account $80 debit

Accepted Answer

The $80 difference is a reduction in revenue, so it should be recorded as a debit to Medical Services Revenue.

Question 12

Employees have the legal option to have less federal income taxes withheld than the amount calculated on their W-4 forms.

Accepted Answer

Employees cannot legally choose to have less federal income tax withheld than what is calculated based on their W-4 form. The withholding is determined by the IRS guidelines to ensure the correct amount of tax is paid throughout the year.

Question 13

A group practice comprised of four physicians hires a part-time custodian to clean the facility after each work day. The wages paid should be listed under Contract Services.

Accepted Answer

The wages paid to a part-time custodian hired by the practice should be listed under Payroll Expenses or Salaries and Wages, not under Contract Services, since the custodian is an employee of the practice, not an external contractor.

Question 14

In 2011 a healthcare business paid an office manager $80,000. How much Social Security tax was paid by the company and how much was withheld from the employee?
A) $0 and $3,360
B) $4,960 and $3,360
C) $1,160 and $1,160
D) $3,360 and $3,360

Accepted Answer

The answer of In 2011 a healthcare business paid an...

Question 15

The income statement reports on revenues, cash, and short-term investments.

Accepted Answer

The income statement reports on revenues, expenses, and profits, but not on cash and short-term investments, which are typically found on the balance sheet.

Question 16

A physician's practice is a sole proprietorship professional corporation. Most patients are covered by group healthcare insurance provided by their employers (or their spouses' employers). Who is responsible for making sure that the insurance companies and patients have paid the proper amounts?
A) the patients
B) the insurance companies
C) the employee benefits offices
D) the physician practice

Accepted Answer

The physician practice is responsible for ensuring that insurance companies and patients have paid the proper amounts. This involves billing, tracking payments, and following up on any discrepancies or unpaid claims.

Question 17

A liquidity ratio of 9 indicates that a business ____.
A) will run out of money in 9 days
B) has liquid assets equivalent to the costs of 9 days of operation
C) has 9 times as much assets as debts
D) is 9 times more likely to fail than average

Accepted Answer

The liquidity ratio measures a company's ability to meet its short-term obligations. A liquidity ratio of 9 indicates that the company has liquid assets equivalent to the costs of 9 days of operation.

Question 18

A physician decides to radically change her practice. She now only provides services to patients who will pay her full charges at the time of service. She was able to lower her full charges because the new practice ____,
A) has fewer patients
B) needs no billing staff
C) needs no computer support
D) has lower benefits costs per employee

Accepted Answer

By requiring payment at the time of service, the physician can eliminate the need for a billing staff, which is responsible for processing insurance claims and managing accounts receivable. This can lead to significant cost savings.

Question 19

The federal government regulates base pay and overtime through the ____.
A) Minimum Wage Act of 1994
B) Fair Labor Standards Act of 1938
C) Non-exempt Employee Protection Act of 1965
D) Wage and Employment Growth Act of 1999

Accepted Answer

The Fair Labor Standards Act of 1938 (FLSA) is the federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

Question 20

Return on equity is a type of ____.
A) intangible asset
B) profit level ratio
C) solvency ratio
D) liquidity ratio

Accepted Answer

Return on equity (ROE) is a measure of a company's profitability that takes a company's annual return (net income) divided by the value of its total shareholders' equity. It is considered a profit level ratio because it measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It indicates how effectively management is using a company’s assets to create profits.

Quiz 7: The Income Statement

A dental practice has fiscal year revenues of $850,000 and expenses of $520,000. The practice's net income for that fiscal year is $330,000.

Which of the following can be used to legally reduce the amount of federal income tax withheld from an employee's pay?

Income statements must be prepared ____.

A medical laboratory supervisor has been spending 20 hours per week working in the lab as a technologist because of a staffing shortage. If she work more than 40 hours per week, the laboratory ____.

Two physical therapists own a partnership and receive draws each month for the medical services they provided. The draws should be recorded as business expenses.

Which of the following is a non-exempt employee?

A physical therapist has a standard charge of $100 for a back therapy session. A patient makes a co-payment of $20 at the time of service. His insurer sends a payment of $50. Which accounting entry for that payment is correct?

The largest expense category for most healthcare organizations is ____.

Bad debt expense is ____.

The full charge for a medical service is $180. The group healthcare insurer pays $100 for that service. Which of the following is a correct way to record the $80 difference?

Employees have the legal option to have less federal income taxes withheld than the amount calculated on their W-4 forms.

A group practice comprised of four physicians hires a part-time custodian to clean the facility after each work day. The wages paid should be listed under Contract Services.

In 2011 a healthcare business paid an office manager $80,000. How much Social Security tax was paid by the company and how much was withheld from the employee?

The income statement reports on revenues, cash, and short-term investments.

A physician's practice is a sole proprietorship professional corporation. Most patients are covered by group healthcare insurance provided by their employers (or their spouses' employers) . Who is responsible for making sure that the insurance companies and patients have paid the proper amounts?

A liquidity ratio of 9 indicates that a business ____.

A physician decides to radically change her practice. She now only provides services to patients who will pay her full charges at the time of service. She was able to lower her full charges because the new practice ____,

The federal government regulates base pay and overtime through the ____.

Return on equity is a type of ____.