A corporation incurred $111,000 costs to extract a diamond. The diamond turned out to be flawed, so the company decided to break it into small pieces and sell diamond chips. The company was uncertain if the diamond chips would sell at all. The diamond chips did sell, and the company had the following sales and accounts receivable balances over the five following years: Accounts Receivable

	Balance	Sales
January 1, 2001	$0	$15,000 for 2001
January 1, 2002	10,500	30,000 for 2002
January 1, 2003	25,500	60,000 for 2003
January 1, 2004	40,500	24,000 for 2004
January 1, 2005	78,000	15,000 for 2005

The accountant recommended that the company use the cost recovery method of income recognition. Using this method, the company will recognize revenue as follows:

	2013	2014
1	$60,000	$60,000
2	24,000	24,000
3	0	0
4	6,000	0
5	Not determinable based on the data given

Multiple Choice

• Choice 2

• Choice 5

• Choice 4

• Choice 1

• Choice 3