The installment method apportions the cash receipt between cost recovered and profi t using the ratio of profi t to sales value; here, this ratio equals $900,000
$2,000,000 0.45 or 45 percent. Therefore, the seller will recognize the following profi t
attributable to the down payment: 45 percent of $300,000 $135,000.
Solution to 2. Under the cost recovery method of revenue recognition, the company
would not recognize any profi t attributable to the down payment because the cash
amounts paid by the buyer still do not exceed the cost of $1,100