Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the cost recovery method. Merchandise costing $33,000 was sold for $56,500 in 2020. Collections on this sale were $19,600 in 2020, $14,700 in 2021, and $22,200 in 2022. In 2021, Reliable would recognize gross profit of:
Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the cost recovery method. Merchandise costing $33,000 was sold for $56,500 in 2020. Collections on this sale were $19,600 in 2020, $14,700 in 2021, and $22,200 in 2022. In 2021, Reliable would recognize gross profit of:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured, and
In 2021, Reliable would recognize gross profit of:
Multiple Choice
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$2,300.
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$1,300.
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$0.
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$13,400.
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