Earnings Approach to Revenue Recognition

question 93

Essay

Earnings approach to revenue recognition
Fabathletics sends an outfit to monthly subscribers each month. If the customer does NOT want the outfit in a given month they can send it back before the last day of that month free of charge in exchange for a store credit. Fab prepares its financial statements in accordance with ASPE.
Instructions
Describe when these transactions should be recognized as sales under the earnings approach.

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