Quiz 06.72 – T/F Low Uncertainty in Receivable Collection with Installment Sales Method
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
The installment sales method implies high certainty of receivable collection.
The installment sales method implies high certainty of receivable collection.
The installment sales method and the cost recovery method result in the recognition of the same total amount of gross profit over the life of a specific account receivable.
IFRS allows companies to choose between the percentage-of-completion method or the cost recovery method when accounting for long-term construction contracts.
Under IFRS, the cost recovery method for long-term construction contracts necessitates recognizing equal amounts of revenue and cost until all costs have been recovered.
The cost recovery method for long-term construction contracts under IFRS recognizes equivalent cost and revenue during the early stages, leading to substantial gross profit in net income.
The cost recovery method is generally used by companies under IFRS when they determine that the percentage-of-completion method is not suitable for long-term construction contracts.
Revenue from computer software sales is recognized at the time of sale.
The typical approach for revenue allocation in a multiple-element contract is based on the relative selling prices of each part.
Objective proof of separate prices is mandatory for multi-element software contracts, while estimated selling prices are acceptable for other multi-element contracts in compliance with U.S. GAAP.
Franchise fee revenue recognition depends on evaluating both substantial performance and fee collection expectations.