The Jolly Company Makes Sales on an Installment Basis

question 4

Multiple Choice

The Jolly Company makes sales on an installment basis. In 2016, it sells items with a cost of $120 million. The total sales price is $125 million. Ignoring interest payments, customers pay in five equal installments, of $25 million each, with one payment in each of 2016, 2017, 2018, 2019, and 2020. If the company uses the cost recovery method of accounting for this sale, the gross profit it will recognize in 2016 is

• A) Zero
• B) $1 million
• C) $5 million
• D) $25 million

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Definitions:

Vicarious Learning

Learning that occurs by observing the actions and outcomes of others’ behavior, rather than through direct experience.

Rewarded

Given something, usually of value or significance, in recognition of service, effort, or achievement.

Punished

The act of administering a negative consequence to reduce the likelihood of a behavior recurring.

Social Learning

The theory that people can learn new behaviors by observing and imitating others.