It is early in January 2012. You have just been hired by Zenith Creations and assigned to the accounting department. The company specializes in creative sales displays used to market point-of-purchase goods, and it has several large customers that annually hire Zenith to design and manufacture displays for retail outlets. The company has grown quickly and recently has moved from a pure manufacturing firm to one that provides both manufacturing and creative services. In fact, the company's name was just changed from Zenith Manufacturing.
Recently, two giant companies in the industry have shown a serious interest in acquiring Zenith, which has caused Zenith's management to be particularly concerned with how the financial statements are interpreted by outside parties—especially the potential buyers, who will likely base their offers on assessments of Zenith's financial condition and performance. At the same time, management is considering several actions and wants to know in advance how these actions will affect the financial statements, financial ratios, and outsider evaluations of Zenith's financial condition and performance. The actions are listed below.