The installment method of revenue recognition can be used when cash collectibility is uncertain.The installment method
A) requires that no income is recognized until all installments are received.
B) requires that gross profit is recognized as each installment payment is received.
C) requires that entire cost of the sale be recovered prior to any income being recognized.
D) allows revenue recognition at the time of the sale.

Question

Quizplus · Accepted Answer

The installment method allows for recognition of gross profit as each installment payment is received. It does not require that the entire cost of the sale be recovered prior to recognizing income. Additionally, it allows for revenue recognition at the time of the sale, but only for the portion of the sale corresponding to the payment received. This method is used when there is uncertainty about cash collectibility.

The Installment Method of Revenue Recognition Can Be Used When