A Seller Is Using the Cost-Recovery Method for a Sale

question 50

Multiple Choice

A seller is using the cost-recovery method for a sale. Interest will be earned on the future payments. Which of the following statements is not correct?

• A) After all costs have been recovered, any additional cash collections are included in income.
• B) Interest revenue may be recognized before all costs have been recovered.
• C) The deferred gross profit is offset against the related receivable on the balance sheet.
• D) Subsequent income statements report the gross profit as a separate item of revenue when it is recognized as earned.

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Definitions:

Benzene

A volatile, colorless, and highly flammable liquid hydrocarbon, used as a solvent and in the manufacture of various chemicals, known for its carcinogenic properties.

Methane

A potent greenhouse gas and energy source, consisting of one carbon atom bonded to four hydrogen atoms (CH4).

Lichens

Symbiotic organisms composed of a fungus and a photosynthetic partner, typically algae or cyanobacteria, that live together in a mutualistic relationship.

Air Pollution

The presence of substances in the air at levels that are harmful to human health or the environment, originating from various sources like industrial activities, vehicle emissions, and natural events.