Asked by Amanda Herrera on May 27, 2024
Verified
Under the cost recovery method of revenue recognition
A) income is recognized on a proportionate basis as the cash is received from the sale.
B) income is recognized immediately.
C) income is recognized when the cash received from the sale exceeds the cost of the product sold.
D) income is recognized when all of the cash has been receiveD.
Cost Recovery Method
An accounting technique used when the future collectibility of revenue is uncertain, recognizing revenue only when cash payments are received.
Revenue Recognition
An accounting guideline that specifies when revenue should be recognized and recorded.
- Comprehend the distinctions and commonalities between U.S. GAAP and IFRS concerning the recognition of revenue.
- Accurately account for revenue and expenses in accordance with the installment sales method.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
C
Explanation :
Under the cost recovery method, income is recognized when the cash received from the sale exceeds the cost of the product sold. This means that the company must recover its costs before recognizing any income from the sale. Therefore, income is recognized on a partial basis and only when the cost of the product has been fully recovered.
Learning Objectives
- Comprehend the distinctions and commonalities between U.S. GAAP and IFRS concerning the recognition of revenue.
- Accurately account for revenue and expenses in accordance with the installment sales method.
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