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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.
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 $30,250 was sold for $55,000 in 2020. Collections on this sale were $21,000 in 2020, $14,100 in 2021, and $19,900 in 2022.
In 2020, Reliable would recognize gross profit of:
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