*Dips toe into the water* First time joining this group. Gearing up for what I hope to be a successful 3rd attempt at passing my nemesis, FAR in mid-April. Like many working parents, I gave up sleep and live on coffee to study in the wee hours of the morning. ELL doesn't work for me given the constant fires I have to put out at work. I can commiserate on the work-life balance. It is what it is.
I need help before I start stomping my feet out of frustration… There's a MCQ whose answer explanation has me completely stumped:
“The installment method of accounting for sales is acceptable under which of the following conditions?
a. Receivables are collected within a short period of time. (Obviously this is not it)
b. Circumstances exists such that collection of the sales price is not reasonably assured. (This is a likely answer)
c. There is no reasonable basis for estimating the degree of collectability. (This is a likely answer to me as well)
d. All of above.” (Well, it's not applicable b/c I ruled out answer choice a.)
Book says it is “b” because: “The installment method of accounting for sales is not acceptable unless circumstances exist such that collection of the sales price is ‘not reasonably assured'.”
I looked over the text on the topic and the text does not mention anything about applying installment method to tranxs where collection of sales price is not reasonably assured. It only touches on that under the Cost Recovery method. All the book mentions is applying installment method when there is no reasonable basis for estimating the degree of collectiability, which is answer choice “c”, which was my pick. Still, what the fudge?!?!? Can someone break it down for me in simple terms? Or is this just a very badly written explanation in Bisk? I tried Google-ing for discussion on this MCQ and other info on this topic, but to no avail.
Thanks in advance, fellow Ninjas.
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