Directions
Read the “Harnischfeger Corp” case study and answer the following questions. Submit your completed assignment no later than the last day of Week 2.
1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.
After reviewing the accounting policies of other corporations in similar industries, Harnischfeger decided to adjust their depreciation method. Instead of continuing to use the accelerated method for depreciating their US Operating Plans, Harnischfeger decided to use the straight-line method. The new method was applied to past periods which resulted in an overall increase of net income. However, looking soley at the current period, the adjustment did not have a significant imapact; it seems as if the majority of the depreciation with the accelerated method had already been expensed in previous periods. Regardless of whether or not the change was made, Note 2 is informing the public that the current year depreciation would have been in the same range. In addition to changing the depreciation method, the Corporation also updated the useful lives and residual value for some of their property, plant, and equipment.
Some other changes the Corporation made were in regards to their sales with Kobe, and including the financial statements of some of their foreign subsidaries. The inclusion from the subsidaries did not have a significant impact in the current period. However, the adjustment with Kobe did have more of a significant impact. The net sales from Kobe should be recorded; it is important to accurately reflect the corporation’s transactions.

2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years?
As stated above, the stand-alone effect in 1984 is not significant. The cumulative effect