Derivatives : Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options. Hedging : This is the business deal entered into, by a company to produce exposure or coverage over the exposure caused by the existing deal. In simple terms, this is the transaction which produces gains to cover the losses produced by existing transaction. Fair value hedge : If the company uses any derivative to cover the risk due to fair value changes of asset, liability, or a commitment, the derivative is classified as fair value hedge. To explain : Whether the gains and losses on fair value hedge should be recorded immediately, or should be included in the gains and losses on the item being hedged

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Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Hedging: This is the business deal entered into, by a company to produce exposure or coverage over the exposure caused by the existing deal. In simple terms, this is the transaction which produces gains to cover the losses produced by existing transaction.

Fair value hedge: If the company uses any derivative to cover the risk due to fair value changes of asset, liability, or a commitment, the derivative is classified as fair value hedge.

To explain: Whether the gains and losses on fair value hedge should be recorded immediately, or should be included in the gains and losses on the item being hedged

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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?