A Firm Using the Instalment Method of Revenue Recognition Repossessed

question 46

Essay

A firm using the instalment method of revenue recognition repossessed an item it sold for $40,000 (cost $24,000) after the customer stopped remitting cash. Only $26,000 was paid by the customer to the date of repossession at which time the item is worth only $8,000.
(1) Determine the accounting gain or loss on repossession.
(2) Determine the economic gain or loss-the change in the value of the firm-as a result of the sale and repossession.
(3) Reconcile total accounting earnings with the value you computed in (2).

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Definitions:

Clinical Psychologist

A professional in psychology who assesses, diagnoses, and treats mental, emotional, and behavioral disorders through various therapeutic methods.

Abnormality

A deviation from the average or norm that typically signifies the presence of a condition or disorder.

Psychological Disorder

A pattern of behavioral, cognitive, emotional, or physical symptoms shown by an individual, which causes distress, disability, or an increased risk of suffering, death, pain, or an important loss of freedom.

Stereotype

A widely held but fixed and oversimplified image or idea of a particular type of person or thing.