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CFA Level 1 Question of the Week - Financial Reporting and Analysis

Given sales proceeds paid in installments over multiple periods, it is best to use the cost recovery method when:
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CFA Level 1 Question of the Week - Financial Reporting and Analysis 9 votes

A. sure of collecting all payments.
11% 1 vote
B. reasonably sure of collecting all payments.
0% 0 votes
C. uncertain of collecting all payments.
88% 8 votes

Comments

  • The correct answer is C.

    We use the recovery method when uncertain of collecting all payments. Under the cost recovery method, we do not recognize any income related to a sale transaction until the cost element of the sale has been paid in cash by the customer.
    AnalystPrep
    CFA Question Bank, Video Lessons, and Study Notes can be found at https://analystprep.com 
    Register today for 120 free practice questions and 10 hours of video
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