Zimt AG wrote down the value of its inventory in 2007 and reversed the write-downin 2008. Compared to the ratios that would have been calculated if the write-down hadnever occurred, Zimt’s reported 2007:A. current ratio was too high.B. gross margin was too high.C. inventory turnover was too high.

Zimt AG wrote down the value of its inventory in 2007 and reversed the write-downin 2008. Compared to the ratios that would have been calculated if the write-down hadnever occurred, Zimt’s reported 2007:A. current ratio was too high.B. gross margin was too high.C. inventory turnover was too high.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter13: Accounting For Merchandise Inventory

Section: Chapter Questions

Problem 1CP: Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross...

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Zimt AG wrote down the value of its inventory in 2007 and reversed the write-down in2008. Compared to the results the company would have reported if the write-down hadnever occurred, Zimt’s reported 2008:A. profit was overstated.B. cash flow from operations was overstated.C. year-end inventory balance was overstated.
The Jimenez Corporation’s forecasted 2011 financial statements follow, along withsome industry average ratios.a. Calculate Jimenez’s 2011 forecasted ratios, compare them with the industry averagedata, and comment briefly on Jimenez’s projected strengths and weaknesses.b. What do you think would happen to Jimenez’s ratios if the company initiatedcost-cutting measures that allowed it to hold lower levels of inventory andsubstantially decreased the cost of goods sold? No calculations are necessary:Think about which ratios would be affected by changes in these twoaccounts. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2011AssetsCash $ 72,000Accounts receivable 439,000Inventories 894,000Total current assets $1,405,000Fixed assets 431,000Total assets $1,836,000Liabilities and EquityAccounts and notes payable $ 432,000Accruals 170,000Total current liabilities $ 602,000Long-term debt 404,290Common stock 575,000Retained earnings 254,710Total liabilities and equity…
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