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Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not...

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Accounting

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 $30,750 was sold for $55,250 in 2012. Collections on this sale were $21,900 in 2012, $15,900 in 2013, and $17,450 in 2014. In 2013, Reliable would recognize gross profit of:

A $ 0.

B $ 7,050.

C $ 8,850.

D $ 8,050.

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