A sale that requires the customer to pay the purchase price in instalments
A)should always be recognized under the contract-based view as the contract has already established the customer's obligation to pay.
B)should only be recognized upon receipt of the last instalment payment.
C)may be recognized under the earnings approach if measurement and collectability issues do not exist.
D)None of these.

Question

Quizplus · Accepted Answer

A sale that requires the customer to pay the purchase price in instalments may be recognized under the earnings approach if measurement and collectability issues do not exist. This means that revenue can be recognized over time as each installment is received, as long as there are no uncertainties surrounding the collectability or the amount of future payments. Option A is not entirely accurate as recognition under the contract-based view depends on the specific terms and conditions of the contract. Option B suggests the installment method of revenue recognition, which is not always required. Option D is incorrect as there is a valid option available.

A Sale That Requires the Customer to Pay the Purchase