Answer :
Final answer:
Revenue is recognized for L.L.Bean when the boots are shipped, as this is when the customer takes on the risks and rewards of ownership. This coincides with GAAP principles of revenue being earned and realizable. So, the correct option is b. The boots are shipped.
Explanation:
The question pertains to when L.L. Bean should recognize revenue from the sale of a pair of 8" boots. According to generally accepted accounting principles (GAAP), revenue is recognized when it is earned and realizable, which usually occurs when goods are transferred to the customer, meaning when the boots are shipped. The boots are shipped. This point of revenue recognition ensures that the earnings are matched with the period in which they are generated.
L.L. Bean's commitment to customer satisfaction, as evidenced by its comprehensive money-back guarantee, reinforces the importance of revenue recognition at the point where the customer takes on the risks and rewards of ownership, typically shipment for mail-order companies. L.L. Bean's reputation for quality, combined with its guarantee, allows the company to thrive despite the challenges of selling products without the customer's ability to see and touch the goods before purchase.
