ACCOUNTING FOR INSTALLMENT SALES

Question 1

Used only when there is no reasonable basis of estimating the degree of collectibility.

Answer 1

Installment method of accounting

Question 2

Revenue is recognized when cash is actually collected under

Answer 2

Installment accounting

Question 3

Gross Profit =

Answer 3

Sale - COGS

Question 4

Gross Profit Percentage =

Answer 4

Gross profit / sales price

Question 5

Earned Revenue =

Answer 5

Cash Collections x Gross profit percentage

Question 6

Deferred revenue =

Answer 6

installment receivable x gross profit percentage

Question 7

No profit is recognized on a sale until all costs have been recovered under

Answer 7

Cost recovery method

Question 8

Under cost recovery method, at the time of sale, the expected profit on the sale is recorded as

Answer 8

Deferred Gross Profit

Question 9

Cost recovery method is similar to the _________ ,it is only used when receivables are collected over an extended period and no reasonable basis for estimating their collectibility.

Answer 9

installment sales method

Question 10

Under cost recovery method, cash collections are 1st applied to the

Answer 10

recovery of product cost