Und e r whi c h o f the f oll o wing c i r c umst a n c e s is the inst a llm e

Question

Under which of the following circumstances is the installment sales method appropriate for the recognition of revenue in the income statement? I ruled out B.

a.   For any sales where collection is spread over a reasonable long period of time.

b.   In any situation where management wishes to delay the recognition of revenue in order to smooth its income.

c.   For sales where collection is spread over a reasonable long period of time and significant doubt exists about the ultimate collection of the receivables.

d.   For sales where collection is spread over a reasonable long period of time and no significant doubt exists concerning ultimate collection of the receivables.

Explanation / Answer

c. For sales where collection is spread over a reasonable long period oftime and significant doubt exists about the ultimate collection of the receivables.

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