The Cost-Recovery Method

question 129

Multiple Choice

The cost-recovery method

• A) is prohibited under current GAAP due to its conservative nature.
• B) requires a company to defer profit recognition until all cash payments are received from the buyer.
• C) is used by sellers when there is a reasonable basis for estimating collectibility.
• D) recognizes total revenue and total cost of goods sold in the period of sale.

---

Definitions:

Alternative Minimum Tax

A parallel tax system to the regular income tax that ensures that certain taxpayers pay at least a minimum amount of tax.

Corporations

Legal entities that are separate from their owners, capable of owning property, entering contracts, and being taxed.

Subject

A broad term typically referring to the main topic or person being discussed or studied.

Schedule M-1

A form used by corporations in the U.S. to reconcile income reported for tax purposes with income reported for financial reporting purposes.