**HSA 525 Week 5 Homework Ex 10-1, 10-2,10-3, Ex 11-1, 11-2, 11-3, Ex 12-1, 12-2, 12-3, 12-4, 12-5 NEW**

**Assignment Exercise 10–1: Components of Balance Sheet and Statement of Net Income**

**Identify the following MHS balance sheet components. List the name of each component and its amount(s) from the appropriate MHS financial statement.**

**Current Liabilities**

Total Assets

Income from Operations

Accumulated Depreciation

Total Operating Revenue

Current Portion of Long-Term Debt

Interest Income

Inventories

Assignment Exercise 10–2: Components of Balance Sheet and Income Statement

**Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in Chapter 28’s MHS Case Study. Patient accounts receivable of $7,400,000 is shown as net of $1,300,000 allowance for bad debts (8,700,000 − 1,300,000 = 7,400,000).**

(1) What percentage of gross accounts receivable is the allowance for bad debts?

Assignment Exercise 10–3: Components of Balance Sheet and Income Statement

**Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in Chapter 28’s MHS Case Study. Property, plant, and equipment of $19,300,000 is shown as “net,” meaning net of the reserve for depreciation. If the $19,300,000 is reduced by $200,000 (meaning the reserve for depreciation has risen), what happens on the income statement?**

**If the reserve for depreciation has risen, that is the $19,300,000 is reduced by $200,000, it would mean that the net income would be lower. A higher depreciation lowers operating income and this would be reflected on the income statement.**

Assignment Exercise 11–1: Liquidity Ratios

**Refer to the Metropolis Health System (MHS) case study in Chapter 28.**

**1. Set up a worksheet for the liquidity ratios.**

**The liquidity ratios are**

2. Compute the four liquidity ratios using the Chapter 28 MHS financial statement

Assignment Exercise 11–2: Solvency Ratios

Refer to the Metropolis Health System (MHS) case study in Chapter 28.

1. Set up a worksheet for the solvency ratios.

2. Compute the solvency ratios using the Chapter 28 MHS financial statements

Assignment Exercise 11–3: Profitability Ratios

**Refer to the Metropolis Health System (MHS) case study in Chapter 28.**

1. Set up a worksheet for the profitability ratios.

The profitability ratios are: -

2. Compute the profitability ratios using the Chapter 28 MHS financial statements

Assignment Exercise 12–1: Unadjusted Rate of Return

**Metropolis Health Systems’ Laboratory Director expects to purchase a new piece of equipment. The assumptions for the transaction are as follows:**

1. Compute the unadjusted rate of return using the original investment amount.

2. Compute the unadjusted rate of return using the average investment method.

Assignment Exercise 12–2: Finding the Future Value (with a Compound Interest Table)

Compute how much money will be in the account at the end of four more years. (Use the compound interest table found in Appendix 12-B.)

Assignment Exercise 12–3: Finding the Present Value (with a Present-Value Table)

**Part 1—Dr. John Whitten is still figuring out his equipment fund. According to his calculations he needs $250,000 to be accumulated six years from now. John is now trying to find the present value of the $250,000. He continues to assume an interest rate of 5%.**

**Compute the present value of $250,000 accumulated fifteen years from now. Assume an interest rate of 5%. (Use the Present-Value Table found in Appendix 12-A at the back of this chapter.)**

Part 2—John doesn’t like the answer he gets. What if he can raise the interest rate to 7%? How much difference would that make?

Compute the present value of $250,000 accumulated fifteen years from now assuming an interest rate of 7%.

Compare the difference between this amount and the present value at 5%.

**Assignment Exercise 12–4: Computing an Internal Rate of Return**

Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax net cash inflow of $30,000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be depreciated by the straight-line method. The tax rate is 50%. Determine Dr. Whitten’s approximate after-tax internal rate of return.

**Assignment Exercise 12–5: Payback Period**

Based on the calculations, he should purchase Machine B. It would take approximately two and a half years (2.4 years) for the investment made in Machine B to be equal to the amount of cash originally spent buying the machine. It would take Machine A 3 years to pay back the money spent to purchase it.