If a client presents an extreme credit risk, the seller would be more likely to use the Installment Sales method to account for the transaction than the Cost Recovery Method.

Question

Quizplus · Accepted Answer

The Cost Recovery Method is more likely to be used for clients presenting an extreme credit risk because it recognizes profit only when cash payments actually received exceed the cost of the goods sold, minimizing the risk of recognizing income that may never be realized due to the client's credit risk.

If a Client Presents an Extreme Credit Risk, the Seller