When a $100 000 Sale of a Yacht Is Made

question 3

Multiple Choice

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

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Definitions:

Accrued Interest

Interest that has been incurred but not yet paid.

Interest Method

A technique used in finance to calculate the interest portion of a loan or investment payment, often employed in amortizing a bond discount or premium.

Effective Interest Method

A method of calculating the amortized cost of a bond and the amount of interest expense over the life of the bond by applying the effective interest rate to the carrying amount of the bond.

Accrued Interest

Interest that has been earned but not yet received or recorded as payment, often associated with loans or bonds.