Which of the Following Suggested Bases of Recognizing Revenue Is

question 35

Multiple Choice

Which of the following suggested bases of recognizing revenue is not permitted by authoritative literature?

• A)During production for long-term construction contracts if reliable estimates of the extent of progress and of the cost to complete can be made and if reasonable assurance of collectibility exists.
• B)At the completion of production if immediate marketability at a quoted price exists for a product whose units are interchangeable.
• C)On an accretion basis where product marketability at known prices exists and it is desirable to recognize changes in assets, such as growing timber.
• D)On a cash basis if no reasonable basis exist for estimating collectibility.

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Definitions:

Credit Sales

Sales in which revenue is recognized at the point of sale but payment is deferred till a later date, typically employed in business-to-business transactions.

Uncollectible Accounts

Receivables that are deemed to be uncollectable from debtors, leading to their recognition as a loss.

Credit Policy

Guidelines that define the credit limits and terms extended by a business to its customers.

Percentage of Receivables Basis

A method for estimating uncollectible accounts by applying a fixed percentage to the total receivables balance.