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BROOKSTONE OB/GYN ASSOCIATES

OPERATING STATEMENTS

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL
REVENUE:
Professional Services $ 678.2 $ 693.1 $ 704.9 $ 719.0 $ 732.7 $ 748.8 $ 763.8 $ 779.1 $ 794.6 $ 810.5 $ 826.7 $ 843.3 $ 9,094.7
Less: allowances and bad debts 135.6 138.6 141.0 143.8 146.5 149.8 152.8 155.8 158.9 162.1 165.3 168.7 1,818.9
NET REVENUE $ 542.6 $ 554.5 $ 563.9 $ 575.2 $ 586.2 $ 599.0 $ 611.0 $ 623.2 $ 635.7 $ 648.4 $ 661.4 $ 674.6 $ 7,275.8

EXPENSES:
Physician payments $ 110.2 $ 113.3 $ 118.0 $ 122.7 $ 125.9 $ 130.6 $ 141.6 $ 141.6 $ 141.6 $ 141.6 $ 141.6 $ 141.6 $ 1,570.3
Administrative salaries 57.5 61.6 61.6 65.7 65.7 73.9 73.9 73.9 73.9 73.9 73.9 73.9 829.4
Benefits 27.8 28.8 29.8 31.1 31.1 33.5 35.7 35.7 35.7 35.7 35.7 35.7 396.4
Medical Supplies 10.2 10.4 10.6 10.8 10.8 11.2 11.5 11.7 11.9 12.2 12.4 12.6 136.3
Rent and Utilities 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 523.2
Billing/collection fees 54.3 55.0 56.4 57.5 57.5 59.9 61.1 62.3 63.6 64.8 66.1 67.5 726.0
Equipment depreciation 2.0 2.0 2.0 2.4 2.4 2.4 2.6 2.6 2.6 2.9 2.9 2.9 29.7
Office expense 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 60.0
Liability insurance 101.7 104.0 105.7 107.9 107.9 112.3 114.6 116.9 119.2 121.6 124.0 126.5 1,362.2
Contracted services 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 127.2
Other 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 54.0
Contribution to Dean 59.7 61.0 62.0 63.3 64.5 65.9 67.2 68.6 69.9 71.3 72.8 74.2 800.4
$ 487.1 $ 499.8 $ 509.8 $ 525.1 $ 529.5 $ 553.4 $ 571.8 $ 576.9 $ 582.1 $ 587.7 $ 593.1 $ 598.6 $ 6,615.1

SURPLUS (DEFICIT) $ 55.5 $ 54.7 $ 54.1 $ 50.1 $ 56.7 $ 45.6 $ 39.2 $ 46.3 $ 53.6 $ 60.7 $ 68.3 $ 76.0 $ 660.7
BROOKSTONE OB/GYN ASSOCIATES
BALANCE SHEET

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

ASSETS:
Cash $ 44.30 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Accounts receivable (net) 1,932.2 2,025.0 2,105.3 2,171.5 2,223.0 2,279.5 2,336.0 2,395.4 2,455.9 2,518.1 2,580.5 2,644.1
Medical supply inventory 135.0 145.0 155.0 165.0 167.0 170.0 173.0 176.0 179.0 182.0 185.0 188.0
Prepaid insurance 275.0 300.0 320.0 320.0 330.0 340.0 340.0 340.0 340.0 340.0 340.0 340.0
Total Current Assets $ 2,386.5 $ 2,470.0 $ 2,580.3 $ 2,656.5 $ 2,720.0 $ 2,789.5 $ 2,849.0 $ 2,911.4 $ 2,974.9 $ 3,040.1 $ 3,105.5 $ 3,172.1
Equipment (net) 1,248.0 1,246.0 1,294.0 1,291.6 1,289.2 1,306.8 1,304.2 1,301.6 1,329.0 1,326.1 1,323.2 1,320.3
TOTAL ASSETS $ 3,634.5 $ 3,716.0 $ 3,874.3 $ 3,948.1 $ 4,009.2 $ 4,096.3 $ 4,153.2 $ 4,213.0 $ 4,303.9 $ 4,366.2 $ 4,428.7 $ 4,492.4

LIABILITIES AND EQUITY:


Bank loan (line of credit) $ - $ 15.5 $ 139.2 $ 153.9 $ 155.2 $ 218.8 $ 228.6 $ 233.8 $ 292.7 $ 285.7 $ 271.2 $ 250.1
Accounts Payable 76.5 78.0 79.6 81.2 82.7 84.4 86.1 87.8 89.6 91.4 93.2 95.0
Payable to Dean 141.2 151.4 160.3 167.5 173.2 179.4 185.6 192.1 198.8 205.6 212.5 219.5
Total Current Liabilities $ 217.7 $ 244.9 $ 379.1 $ 402.6 $ 411.1 $ 482.6 $ 500.3 $ 513.8 $ 581.1 $ 582.7 $ 576.9 $ 564.6
Note payable 630.0 630.0 600.0 600.0 600.0 570.0 570.0 570.0 540.0 540.0 540.0 540.0
Fund Balance --
Start-up Contribution 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0
Retained surpluses 1,786.7 1,841.1 1,895.2 1,945.4 1,998.2 2,043.8 2,083.0 2,129.3 2,182.9 2,243.6 2,311.8 2,387.8
TOTAL LIABILITIES & FUND BALANCE 3,634.4 3,716.0 3,874.3 3,948.0 4,009.3 4,096.4 4,153.3 4,213.1 4,304.0 4,366.3 4,428.8 4,492.5
BROOKSTONE OB/GYN ASSOCIATES
RECONCILIATION FOR BANK LOAN (LINE OF CREDIT)
INDIRECT METHOD: CASH FLOW RECONCILIATION

Assumptions JULY AUG SEP OCT NOV DEC

Surplus from Operating Statement 39.2 46.3 53.6 60.7 68.3 76.0
ADD BACK DEPRECIATION 2.6 2.6 2.6 2.9 2.9 2.9
CHANGE IN ASSETS:
Accounts receivable (56.5) (59.3) (60.5) (62.2) (62.4) (63.6)
Medical supply inventory will grow by 3,000 (3.0) (3.0) (3.0) (3.0) (3.0) (3.0)
Prepaid insurance - - - - - -
Equipment (30.0)
CHANGE IN LIABILITIES:
Accounts Payable Inceases 2% per month 1.7 1.7 1.8 1.8 1.8 1.9
Payable to Dean Beg Bal+11% Net Rev-11% Collections 6.2 6.5 6.7 6.8 6.9 7.0
Note payable 30,00 loan paid Sept - - (30.0) - - -

NET CASH FLOW CHANGE (9.8) (5.2) (58.9) 7.0 14.5 21.2
BEGINNING BANK LOAN BALANCE 218.8 228.6 233.8 292.7 285.7 271.2
ENDING BANK LOAN BALANCE 228.6 233.8 292.7 285.7 271.2 250.1
BROOKSTONE OB/GYN ASSOCIATES
T-ACCOUNTS FOR REVENUE AND EXPENSE TRANSACTIONS

MONTH OF JULY MONTH OF AUG.

Operating Surplus (B/S) Operating Surplus (B/S)


Debit Expenses Revenue Credit Debit Expenses Revenue Credit

571.85 611.02 576.93 623.24

$2,043.80 Beginning Balance $2,082.97 Beginning Balance


$39.17 NET (Revenue - Expense) $46.31 NET (Revenue - Expense)
$2,082.97 Ending Balance $2,129.28 Ending Balance

MONTH OF SEP. MONTH OF OCT.

Operating Surplus (B/S) Operating Surplus (B/S)


Debit Expenses Revenue Credit Debit Expenses Revenue Credit

582.12 635.71 587.71 648.42

$2,129 Beginning Balance $2,182.86 Beginning Balance


$53.58 NET (Revenue - Expense) $60.71 NET (Revenue - Expense)
$2,182.86 Ending Balance $2,243.57 Ending Balance
BROOKSTONE OB/GYN ASSOCIATES
T-ACCOUNTS FOR REVENUE AND EXPENSE TRANSACTIONS

MONTH OF NOV. MONTH OF DEC.

Operating Surplus (B/S) Operating Surplus (B/S)


Debit Expenses Revenue Credit Debit Expenses Revenue Credit

593.11 661.39 598.62 674.62

$2,243.57 Beginning Balance $2,311.84 Beginning Balance


$68.28 NET (Revenue - Expense) $76.00 NET (Revenue - Expense)
$2,311.84 Ending Balance $2,387.84 Ending Balance
BROOKSTONE OB/GYN ASSOCIATES
T-ACCOUNTS FOR ACCOUNTS RECEIVABLE TRANSACTIONS

MONTH OF JULY MONTH OF AUG.

Accounts Receivable (B/S) Accounts Receivable (B/S)


Debit Revenue Cash Credit Debit Revenue Cash Credit
Collections Collections
611.0208 554.5 623.241216 563.9

Beginning Balance 2279.5 Beginning Balance 2,336.02


NET (Revenue - Collections) 56.52 NET (Revenue - Collections) 59.34
Ending Balance 2,336.02 Ending Balance 2,395.36

MONTH OF SEP. MONTH OF OCT.

Accounts Receivable (B/S) Accounts Receivable (B/S)


Debit Revenue Cash Credit Debit Revenue Cash Credit
Collections Collections
635.70604032 575.2 648.42016113 586.2

Beginning Balance 2,395.36 Beginning Balance 2,455.87


NET (Revenue - Collections) 60.51 NET (Revenue - Collections) 62.22
Ending Balance 2,455.87 Ending Balance 2,518.09
BROOKSTONE OB/GYN ASSOCIATES
T-ACCOUNTS FOR ACCOUNTS RECEIVABLE TRANSACTIONS

MONTH OF NOV. MONTH OF DEC.

Accounts Receivable (B/S) Accounts Receivable (B/S)


Debit Revenue Cash Credit Debit Revenue Cash Credit
Collections Collections
661.38856435 599 674.61633564 611.0208

Beginning Balance 2,518.09 Beginning Balance 2,580.48


NET (Revenue - Collections) 62.39 NET (Revenue - Collections) 63.60
Ending Balance 2,580.48 Ending Balance 2,644.07
Question 2
Briefly describe the decline in available cash position.
The two main reasons of decline in available cash position are: 1) Cash flow difficulties due to time necessary to collect the cas
more than the payment of cash for expenses. 2) Lack of information regarding how much larger line of credit requires covering
cash shortfall.

Briefly describe other strategic options that are available.


By increasing, the BOGAs line of credit the company can manages its decline in available cash position. Mr. Mark Amsted of
implementing the accrual basis accounting policy into the hospital,he was delighted to see the drastic increase in revenue of th
hospital in the early months of 2001.

Question 3

Management Control: The management has forecasted the financial aggregates for the remaining months of 2001. The mana
has forecasted these amounts by looking at the historic financial backgrounds and the historic financial trends of the hospital. O
basis of these values, forecasted financial statements are prepared to analyze the profitability of the hospital.

Strategy Formulation: On the other hand, it is clear that the bad debts of the hospital would also be increasing, which would
negatively affect the profitability of the hospital. In addition to this, the projections also show that the salaries of physicians wou
increase from $130,000 to $141,600 and would remain $141,600 for the entire year. This increase in salary is because of hiring
physicians in June 2001. Administrative salaries have also increased because of hiring new administrative staff.

Task Control: After the decision made by Mr. Mark Amsted of implementing the accrual basis accounting policy into the hospita
was delighted to see the drastic increase in revenue of the hospital in the early months of 2001. Later, he realized that the hosp
having serious cash flow problem as the credit line of $300000 was nearly exhausted at the end of June 2001.
cessary to collect the cash is
f credit requires covering the

on. Mr. Mark Amsted of


increase in revenue of the

months of 2001. The management


al trends of the hospital. On the
ospital.

ncreasing, which would


alaries of physicians would
salary is because of hiring new
ative staff.

ting policy into the hospital,he


he realized that the hospital was
ne 2001.