Which of the following bases of revenue recognition reflects the greatest degree of uncertainty about future critical events?
A) Sales method applied to sales of a department store
B) Cost recovery method applied to a bond investment
C) Production method on cost-plus-fixed-fee contract
D) Percentage-of-completion method on construction contract

Question

Quizplus · Accepted Answer

The cost recovery method applied to a bond investment reflects the greatest degree of uncertainty about future critical events because revenue is recognized only when the cost of the investment is fully recovered, indicating significant uncertainty about the collectibility of the revenue. This method is used when there is a high degree of uncertainty regarding the collection of funds, making it the most cautious approach among the options listed.

Which of the Following Bases of Revenue Recognition Reflects the Greatest