Sweet Dreams and Watch Out for those False Medical Claims!

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If you have been up late watching TV, you might have seen the Infomercial for a Minnesota company that sells My Pillow, a patented open-cell, poly-foam design created by inventor Michael J. Lindell. This staple of late-night TV infomercials has sold about 18 million pillows since 2005. However, a recent lawsuit successfully argued My Pillow overstated its claims.

Questions:
1. What are some of the disputed medical claims related to My Pillow?
2. Where was Mr. Lindell sued?
3. What percentage of annual profits did Mr. Lindell settle the suit for?
4. What is the National Sleep Foundation? Would you consider it to be a related party? Discuss whether the foundation should have not-for-profit status.
5. How should the company record the payment for the settlement in its accounting records? Be sure to include the donation and refund, as well as the settlement amount in your journal entries?

Source:
Guarino, B. (2016). Infomercial sleeper ‘My Pillow’ gets $1 million wake-up call over false medical claims. The Washington Post, Nov. 3 (Retrievable online at https://www.washingtonpost.com/news/morning-mix/wp/2016/11/03/infomercial-sensation-my-pillow-gets-1-million-wake-up-call-over-false-medical-claims/?hpid=hp_hp-morning-mix_mm-pillow%3Ahomepage%2Fstory)