Reference no: EM132678444

Question 1: In what month (if ever) will the $100 associated with the transaction be reflected on the income statement? Assume that Sleep Number accurately estimates bad debts, warranty claims and recoveries.

a. Sleep Number prepays $100 in January for a special order mattress that is purchased in February, sold on account in March and the sales price is collected in April. In which month will the $100 be recognized as an expense:

b. A scientist is paid $100 in January for early-stage research conducted in January on a new hydrogen-based mattress. A mattress based on the invention is manufactured in February, sold on account in March and the sales price is collected in April. In which month will the $100 be recognized as an expense:

c. Import tariffs of $100 are paid in February for mattresses that were purchased by Sleep Number in January, sold by Sleep Number on account in March and the sales price is collected in April. In which month will the $100 be recognized as an expense:

d. Sleep Number sells its product with a warranty and estimates that 2% of mattresses will be returned under warranty. Warranties are satisfied by replacing the defective mattress with a new one. Sleep Number sells a mattress in January and in March the mattress is returned under warranty. The warranty is satisfied with a mattress that was purchased in February for cash of $100. In which month will the $100 be recognized as an expense:

e. Sleep number sells its product on account and estimates that 2% of accounts receivable will ultimately be uncollectible. Sleep number sells a mattress for $100 in March and in April learns that the customer is bankrupt and will not repay. The mattress was purchased for $50 in January and paid for in February. In which month will the $100 be recognized as an expense:

f. Sleep Number declares and pays a quarterly dividend of $100 in April. Sleep Number has a policy of always paying a dividend based on 50% of the previous month's net income and March's net income was $200. In which month will the $100 be recognized as an expense:

g. Sleep Number pays $100 in severance in April to employees who were laid off when Sleep Number closed their French operations in March. The closure decision was made in March based in poor sales in February and the associated buildings were sold in June. In which month will the $100 be recognized as an expense:

h. In April, Sleep Number realizes that a $100 receivable that was written off in March is collectable. The receivable originated from a sale in January and collection occurs in March. In which month will the $100 recovery reduce expenses: