D is corrent. Profit is deemed to be realized when a sale in the ordinary course of business is effected, unless the circumstances are such that the collection of the sale price is not reasonably assured. The most conservative accounting treatment in such instances is the cost recovery method, which defers the recognition of any profit until the full cost of the item sold has been collected. Subsequent collections are then considered to be all profit.
A is incorrect because the earnings process is not culminated upon the completion of the equipment, and recognition of income at that time is inappropriate.
B is incorrect because the installment method, which recognizes a proportionate share of profit upon receipt of each installment, is less conservative than the cost recovery method.
C is incorrect because ASC Topic 605 precludes the recognition of profit when there is doubt about the collectibility of the selling price.
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