Question

The installment-sales method of recognizing profit for accounting purposes is acceptable if

a. collections in the year of sale do not exceed 30% of the total sales price.
b. an unrealized profit account is credited.
c. collection of the sales price is not reasonably assured.
d. the method is consistently used for all sales of similar merchandise.

Answer 1

The installment-sales method of recognizing profit for accounting purposes is acceptable if the method is consistently used for all sales of similar merchandise.

Step-by-step explanation:

The installment-sales method of recognizing profit for accounting purposes is acceptable if D. the method is consistently used for all sales of similar merchandise.

This method, also known as the installment method, is used when a company sells goods on credit and recognizes revenue over the period of the installment payments. By consistently using this method for all sales of similar merchandise, a company can accurately represent the timing of revenue recognition in its financial statements.