Question

Which of the following statements is not true concerning installment reporting? 1) At least one payment...

Which of the following statements is not true concerning installment reporting?

1) At least one payment is to be received after the close of the year in which a sale of property is made.

2) The installment method allows gain to be spread over more than one year.

3) The gross profit rate is used to determine the portion of the payment received that is reported as income.

4) An advantage of the installment method is that the dollar amount of income recognized from each payment never varies from year to year.

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Answer #1

Answer is 4)

The dollar amount of income recognised for each payment varies from year to year. Hence statement 4 is incorrect. The dollar amount of income varies since the instalment component will have interest in it

Other statements are correct. At least one payment should be received after close of year in which sale of property is made. Instalment method allows gains to be spread more than one year and gross profit rate is used to determine the portion of payment received that is reported as net income

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