Push Company is a lawn mower manufacturer.

Push was falling short of meeting its sales estimates for its December 31 fiscal year end. The company expected to receive a large order for $40,000 of lawn mowers from Pull Company, a major customer, in April the next year, for goods to be delivered to Pull in May. In December, Push approached Pull with the suggestion that Pull place its upcoming April order immediately. Push offered Pull a significant discount for placing the order early and said that it would hold the inventory for several months before shipping it to Pull in May the next year. Pull agreed and placed the order with Push on December 29. Push set the goods aside in its warehouse in December and recognized a bill and hold sale for the goods on December 30. The goods were shipped to Pull in May the next year.

The bill and hold sale should not have been recognized as a sale in Push Company’s December 31 financial statements because:

(a) Push Company, not Pull Company, requested the early order for the bill and hold transaction.

(b) Nothing in the preceding description of the transaction indicates that Pull Company had a substantial business purpose for ordering the goods on a bill and hold basis.

(c) With a bill and hold sale, the seller recognizes revenue in its income statement but does not recognize cost of goods sold.

(d) Both a and b are correct.