Ulrich Co.sells an asset to a buyer for a total sales price of $6,000 with a payment schedule of $2,000 in year 1, $2,000 in year 2, and $2,000 in year 3.The cost of the asset is $5,000.Under the cost-recovery-first method, what amount of net profit is recognized in year 3?
A)$2,000
B)$1,000
C)$666.67
D)$333.33
E)$0

Question

Quizplus · Accepted Answer

Under the cost-recovery-first method, no profit is recognized until the cost of the asset is fully recovered. In year 3, the total payments received ($6,000) exceed the cost ($5,000) by $1,000, which is recognized as net profit.

Ulrich CoSells an Asset to a Buyer for a Total Sales