On October 1, year 1, Prada Corp., a real estate developer, sold land to Greene Co. for $5,000,000. Greene paid $600,000 cash and signed a 10-year $4,400,000 note bearing interest at 12%.  The carrying amount of the land was $4,000,000 on date of sale. The note was payable in forty quarterly principal installments of $110,000 beginning January 2, year 1. Prada appropriately accounts for the sale under the cost recovery method.  On January 2, year 2, Greene paid the first principal installment of $110,000 and interest of $132,000.  For the year ended December 31, year 1, what total amount of income should Prada recognize from the land sale and financing?
　　A. $132,000
　　B. $252,000
　　C. $0
　　D. $120,000
　　Answer:C
　　C is corrent.  Under the cost recovery method no profit of any type is recognized until the cumulative receipts exceed the cost of the asset sold.  This means that the entire gross profit ($5,000,000 – $4,000,000 = $1,000,000) and the year 1 interest revenue ($132,000) will be deferred until cash collections exceed $4,000,000.  Therefore, no income is recognized in year 1.