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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 $57,750 in 2020. Collections on this sale were $20,500 in 2020, $15,700 in 2021, and $21,550 in 2022. In 2021, Reliable would recognize gross profit of

a. 6950

b. 5950

c. 0

d. 9750

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