On December 20, Zee Company, an office-supply company, placed an order for goods from Papyrus Company, a paper manufacturer.

Zee wanted the goods to be shipped only in March the next year (FOB destination), and a clause to that effect was included in the sales contract. Zee placed the order early to ensure that it would receive the goods in March in the event that Papyrus Company received orders for more inventory than it could fulfill the next quarter.

Papyrus Company should not have recognized the sale to Zee Company as a bill and hold sale in its December 31 financial statements because:

(a) The buyer must have a substantial business purpose for ordering the goods on a bill and hold basis.

(b) Bill and hold sales recognize the revenue from a sale, but fail to recognize the cost of goods sold.

(c) The risks of ownership must have passed to the buyer.

(d) Zee Company had not paid for the goods by December 31.