The method of revenue recognition where the seller collects parts of the selling price in cash and at the same time recognizes as expenses each period the same portion of the cost of goods or services sold as the portion of total revenues recognized is called the
A)completed contract method.
B)direct payment method.
C)installment method.
D)cost-recovery-first method.
E)cost-recovery-last method.

Question

Quizplus · Accepted Answer

The method described in the question is the installment method. Under this method, revenue is recognized as the seller collects cash from the buyer, and the cost of goods sold is recognized proportionately as revenue is recognized. This method is typically used for long-term sales contracts where the buyer pays in installments over a period of time. The other options listed (completed contract method, direct payment method, cost-recovery-first method, and cost-recovery-last method) do not match the description given in the question.

The Method of Revenue Recognition Where the Seller Collects Parts