question archive Reliable Enterprises sells distressed merchandise on extended credit terms

Reliable Enterprises sells distressed merchandise on extended credit terms

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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. It is unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the cost recovery method. Merchandise costing $28,500 was sold for $58,250 in 2015. Collections on this sale were $20,000 in 2015, $15,200 in 2016, and $23,050 in 2017.

In 2016, Reliable would recognize gross profit of:

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