Detailed Answer
(c) According to the installment method of accounting,
gross profit on an installment sale is recognized in income in
proportion to the cash collection. The cash collected from a
given year’s sales is multiplied by that year’s gross profit percentage
to compute the amount of gross profit to be recognized.
Answer (a) describes the point-of-sale recognition basis, while
answer (d) describes the cost recovery method. Answer (b)
does not describe any recognition basis currently used.
