CFA CFA Level 1 CFA Level 1 Question of the Week – Financial Reporting and Analysis

CFA Level 1 Question of the Week – Financial Reporting and Analysis

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    • Matt_AnalystPrep
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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
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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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