Refer to LaGrow Developers.Assuming that LaGrow uses the cost-recovery method,in its December 31,2016 balance sheet,the company would report ________.
A)$3,000,000 net installment accounts receivable
B)$4,000,000 net installment accounts receivable
C)$2,600,000 net installment accounts receivable
D)$5,000,000 net installment accounts receivable

Question

Quizplus · Accepted Answer

Under the cost-recovery method, revenue is not recognized until the cost of the project is fully recovered. Therefore, only the portion of the installment accounts receivable that represents the cost of the project should be reported on the balance sheet as net installment accounts receivable. Since LaGrow has not fully recovered the cost of the project by December 31, 2016, only $2,600,000 (the cost of the project) should be reported as net installment accounts receivable.