When there is a very high degree of uncertainty about the collectibility of the sales price in a sale, the preferred method of revenue recognition is the
A) cost recovery method
B) installment method
C) deferral method
D) proportional performance method

Question

Quizplus · Accepted Answer

The cost recovery method is used when there is a high degree of uncertainty about the collectibility of the sales price, which means the seller is unsure whether the buyer will be able to pay the full sales price. Under this method, revenue is recognized only after the seller has recovered the costs incurred in making the sale. This method is considered the most conservative approach to revenue recognition and is generally used only as a last resort when other methods are not applicable.

When There Is a Very High Degree of Uncertainty About