Given sales proceeds paid in installments over multiple periods, it is best to use the cost recovery method when: A. sure of collecting all payments. B. reasonably sure of collecting all payments. C. uncertain of collecting all payments.

The correct answer is C. We use the recovery method when uncertain of collecting all payments. Under the cost recovery method, we do not recognize any income related to a sale transaction until the cost element of the sale has been paid in cash by the customer.

CFA Level 1 Question Of The Week - Financial Reporting And Analysis (4) - CFA Level 1

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This topic has 1 reply, 1 voice, and was last updated Nov-1910:48 am by Matt_AnalystPrep.

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- Matt_AnalystPrep
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  19 Nov 2019 at 6:36 am
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  Given sales proceeds paid in installments over multiple periods, it is best to use the cost recovery method when:
  - A. sure of collecting all payments.
  - B. reasonably sure of collecting all payments.
  - C. uncertain of collecting all payments.
- Matt_AnalystPrep
  Participant
  - CFA Charterholder
  29 Nov 2019 at 10:48 am
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  The correct answer is C.
  
  We use the recovery method when uncertain of collecting all payments. Under the cost recovery method, we do not recognize any income related to a sale transaction until the cost element of the sale has been paid in cash by the customer.
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