Question - On September 1, 2016, BJK Company sold a large piece of machinery to FB Construction Company for $100,000. The cost of the machine was $50,000. FB made a down payment of $20,000 and agreed to pay the remaining balance in eight equal monthly installments of $10,000, plus interest at 9% on the unpaid balance, beginning October 1.
Required:
Identify three alternative methods for recognizing revenue and costs for this situation. What would be the gross profit recognized in 2016 and 2017 using each method?
Discuss the circumstances under which each of three methods would be used.