Answered: Both statements are incorrect. Only…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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S1 – Under the installment sales method of recognizing gross profit on installment sales, revenue is realized based on collections; S2 – The installment sales method of recognizing gross profit on installment sales is consistent with the application of the matching process and net income is distorted for although the cost of installment sales and collection cost are matched against installment sales, it does not match the related expenses that are incurred in the period of sale.

Both statements are incorrect.

Only S2 is correct.

Both statements are correct.

Only S1 is correct.

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