Company History: Harnischfeger Industries, Inc. is a world leader in the manufacture, marketing, and servicing of mining equipment for both surface and underground operations. Until the year 2000, when it sold its Beloit Corporation subsidiary, Harnischfeger was also a major manufacturer of machinery for the pulp and paper industry. The company is represented in markets around the world, including Europe, Latin America, Australia, and Southeast Asia, and in South Africa, Canada, and the United States
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1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. Note 2 (pg. 17) states that in 1984 Harnischfeger changed their depreciation method that was being used to expense their plants, machinery and equipment from the direct method to the straight-line method for financial reporting purposes. An adjustment of the residual values on certain machinery and equipment was made. Harnischfeger also included the products purchased from Kobe
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1. Identify all the accounting policy changes and accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company’s 1984 reported profits. In early 1980s Harnischfeger Corporation, a machinery company based in Milwaukee, Wisconsin, faced a severe financial crisis. The company’s poor performance continued through 1983, however, the company reported net profit in 1984. This positive result was a consequence of a number of changes that
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Week 3 case study: Harnischfeger Corporation 1. Identify all the accounting policy changes and accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company’s 1984 reported profits. * Harnischfeger retroactively changed its depreciation method from accelerated to straight-line for all depreciable assets. The cumulative effect of this accounting policy change, which not including the reduction in the current year’s depreciation
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Harnischfeger 1.) Effective November 1, 1983 the corporation includes its net sales products purchased from Kobe Steel, Ltd and sold by the corporation transactions with Kobe. During the fiscal year 1984 such sales aggregated $28 million, previously only the gross margin on Kobe originated equipment. In 1984, Harnischfeger changed its accounting policy on depreciation. Previously before the corporation used an accelerated method for its US plants. The new policy employs a straight-line method
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method, they must depreciate the same amount for the life of the asset. Due to the change to a straight-line method, its profits will decrease in future years. 3. The depreciation lives changes will decrease the annual depreciation expense. Harnischfeger will continue to use the plants, machinery and equipment for a longer period of time before it is replaced. This might have a negative effect on efficiency and productivity due to outdated equipment. It might also increase the probability of the
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CHAPTER 3 OVERVIEW OF ACCOUNTING ANALYSIS HARNISCHFEGER CORPORATION 1 Identify all the accounting policy changes and accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company’s 1984 reported profits. i. Harnischfeger Corporation had changed from accelerated to straight-line method for computing depreciation expenses on plants, machinery and equipment in 1984.The cumulative effect is that net income for 1984 increased by
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Harnischfeger Corp. Case Harnischfeger Corp. is a large New York Stock Exchange company but with old-line, low-tech. This family-based old midwest company had a history for almost 100 years. When the recession hit the financial world during 1980-1981, Harnischfeger could hardly maintain its solid financial performance. Finally, it violated the bond covenants that significantly cause financial distress. In the year of 1984, a number of accounting policy changes were made by the new manager, Peter
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Harnischfeger Corporation Introduction Harnischfeger Corporation is a machinery company in Milwaukee, Wisconsin. Harnischfeger was founded in 1884 as a partnership and was incorporated in Wisconsin in 1910 under the name Pawling and Harnischfeger. There were two major segments in this company, Construction Equipment and the Mining and Electrical Equipment divisions and Material Handling Equipment and the Harnischfeger Engineers divisions. Harnischfeger experienced a rapidly growth during
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Harnischfeger Corporation, a large New York Stock Exchange company, faced a financial crisis in 1982. New management was appointed to turn the company around and as part of its restructuring strategy, the new management team made a number of financial reporting policy changes and accounting estimates in fiscal year 1984. Listed below are all of the changes and analysis on whether they might be real earnings management activities. In addition, the effect of these changes on the company’s revenue,
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