A Corporation Incurred $111,000 Costs to Extract a Diamond The Accountant Recommended That the Company Use the Cost Recovery

A corporation incurred $111,000 costs to extract a diamond. The diamond turned out to be flawed, so the company decided to break it into small pieces and sell diamond chips. The company was uncertain if the diamond chips would sell at all. The diamond chips did sell, and the company had the following sales and accounts receivable balances over the five following years: Accounts Receivable $\begin{array}{|l|l|l|}\hline & \text { Balance } & \text { Sales } \\\hline \text { January 1, 2001 } & \$ 0 & \$ 15,000 \text { for 2001 } \\\hline \text { January 1, 2002 } & 10,500 & 30,000 \text { for 2002 } \\\hline \text { January 1, 2003 } & 25,500 & 60,000 \text { for } 2003 \\\hline \text { January 1, 2004 } & 40,500 & 24,000 \text { for } 2004 \\\hline \text { January 1, 2005 } & 78,000 & 15,000 \text { for } 2005 \\\hline\end{array}$ The accountant recommended that the company use the cost recovery method of income recognition. Using this method, the company will recognize revenue as follows: $\begin{array}{|l|l|l|}\hline &2013 & 2014 \\\hline 1 & \$ 60,000 & \$ 60,000 \\\hline 2 & 24,000 & 24,000 \\\hline 3 & 0 & 0 \\\hline 4 & 6,000 & 0 \\\hline 5 & \text { Not determinable based on the data given } \\\hline\end{array}$

A) Choice 1
B) Choice 2
C) Choice 3
D) Choice 4
E) Choice 5