Classification of Assets Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue. In accounting, the assets are classified into two categories: Current Assets: Current assets are the assets that are easily convertible to cash within a year of business operations. For example, cash and cash equals, Account receivables, Inventories, Prepaid Expenses. Non-current Assets: It indicates to the assets otherwise known as fixed assets, that are held by the concern for more than one year and are not meant to be sold in the near future rather held to generate profits. It is classified into two categories: Intangible Assets: It refers to the assets that have physical existence that can be seen, felt and touched. For example, property, furniture, and machinery. Tangible Assets: It refers to the assets that does not have any physical existence and cannot be seen, felt or touched. For example, patents, copyrights, and goodwill . To Identify: The following items as (a) current asset or (b) property, plant and equipment.

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Chapter 4, Problem 4.10EX

To determine

Classification of Assets

Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue.

In accounting, the assets are classified into two categories:

Current Assets: Current assets are the assets that are easily convertible to cash within a year of business operations. For example, cash and cash equals, Account receivables, Inventories, Prepaid Expenses.

Non-current Assets: It indicates to the assets otherwise known as fixed assets, that are held by the concern for more than one year and are not meant to be sold in the near future rather held to generate profits. It is classified into two categories:

Intangible Assets: It refers to the assets that have physical existence that can be seen, felt and touched. For example, property, furniture, and machinery.

Tangible Assets: It refers to the assets that does not have any physical existence and cannot be seen, felt or touched. For example, patents, copyrights, and goodwill.

To Identify: The following items as (a) current asset or (b) property, plant and equipment.

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L.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question: Assume another customer has returned a pair of duck boots (original cost $109) to L.L. Bean. What journal entry would L.L. Bean make to process the return and refund the original purchase price to the customer?