Lake Power Sports sells jet skis and other powered recreational equipment/ Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses cost recovery method to recognize revenue on these installment sales. In 2015, Lake began operations and sold jet skis with a total price of $1,020,000 that cost Lake $510,000. Lake collected $340,000 in 2015, $340,000 in 2016, and $340,000 in 2017 associated with those sales. In 2016, Lake sold jet skis with a total price of $1,920,000 that cost Lake $1,152,000. Lake collected $640,000 in 2016, $512,000 in 2017, and $512,000 in 2018associated with those sales. In 2018, Lake also repossessed $256,000 of jet skis that were sold in 2016. Those jet skis has a fair value of $96,000 at the time they were repossessed.In 2017, Lake would recognize realized gross profit of:A. $0B. $340,000C. $852,000D. $650,000

The COGS for year 2015 were fully recovered before 2016 ended ($340,000 + $340,000 - $510,000, surplus of $170,000), so all the income collected in 2017 will be considered for calculating gross profit.

The COGS for year 2016 were fully recovered by the end of 2017 ($640,000 + $512,000 - $1,152,000), without any surplus. So the income collected for the 2016 will be considered for calculating the gross profit for 2018.