When a $100 000 sale of a yacht is made by accepting a $10 000 down payment and nine future yearly payments of $10 000 each,profit will most likely be recognised using the:
A)percentage of completion method.
B)instalment method.
C)completed contract method.
D)none of the above

Question

Quizplus · Accepted Answer

The instalment method is used when there is a sale with a down payment and future payments. This method recognises revenue and profit proportionally as each instalment is received. Therefore, in this case, revenue and profit of $10 000 would be recognised each year for the next nine years as each instalment is received. The percentage of completion method and completed contract method are both used in long-term construction projects and are not applicable in this scenario.

When a $100 000 Sale of a Yacht Is Made