Final answer:
The cost-recovery method is least likely to overstate gross profit in sales with high credit risks as it waits until the costs are fully recovered before recognizing profit, unlike the other methods which recognize profit sooner.
Step-by-step explanation:
The question asks which revenue recognition method is least likely to overstate gross profit when a manufacturer sells equipment on an installment basis to customers with questionable credit ratings. Among the options provided, the cost-recovery method is the least likely to overstate gross profit. This method defers all gross profit recognition until the costs of the goods sold are fully recovered through installment payments.
In contras,t thecompletedd contract and percentage-of-completion methods are generally used in long-term contracts where reliable estimates can be made and are more likely to result in earlier recognition of profits, which could potentially overstate gross profit if the customers' creditworthiness is in doubt. The installment-sales method recognizes profit at the time of sale Bui based on the proportion of the cost recovered with each payment, which also might overstate profit if there is a high risk of non-payment.