by Harnischfeger which added on to the net sales of the company. Harnischfeger included financial statements of certain foreign subsidiaries. Its effect would result in sales which totaled to $28.0 million in 1984. In addition, because Harnischfeger would go on to changed its method of depreciation to a more accelerated version, which would be a straight line method, their net income for 1984 went up by $11.0 million. Furthermore, the company went on to increase and change the depreciation life on
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increased, so the depreciation expense was lowered. -The company entered into a long-term agreement with Kobe Steel, Ltd, to supply Harnischfeger requirements for construction cranes for sale in the United States. -There was an improvement in the minimum pension benefit. This change produced a lower pension expense. -The accounts receivable were net of allowances for doubtful accounts of $5.9 million and $6.4 million at October 31, 1984 and 1983, respectively. This decrease results in higher accounts
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subsidiaries. 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? This change increased the net income to 11 million for 1984. This change will decrease profit in future years, because with the accelerated method, in the future years the depreciation expense would have been lower, and with the straight line they will continue to depreciate in the same amount for the life of the asset. 3. What is the
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margin per unit. They also included the financial statements of some foreign subsidiaries. 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? Harnischfeger is adjusting its depreciation policy to the straight-line method from accelerated method they were using previously, which let the company increase net income as the adjustments are being applied retroactively. This change increased the
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assets in U.S. are revalued. In the notes they say that they record a profit by recalculating the depreciation live of the assets. These two changes are giving me the impression that the managers do this for showing a positive net income. 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? The change of the depreciation method form accelerated method to a straight-line method will lower the
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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? The cumulative effect on the change in depreciation method resulted in an increase in net income of $11 million in 1984. Under the new method of depreciation (straight-line), depreciation expense will be lower in upcoming years following the change, resulting in higher profits. On the other hand, had the depreciation method not have changed
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Overview For this assignment, purchase and read the case file “Harnischfeger Corp.” You can purchase the reading from Harvard Business Publishing Web site. After reading the case, answer the questions on page three of this document. Submit your assignment by the end of Week 2. Rubric Use this rubric to guide your work. |Tasks |Accomplished |Proficient |Needs Improvement |Not Acceptable | |Assignment |Insightful
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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
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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. The company calculated depreciation with a straight-line method as opposed to its principally accelerated methods for its US operating plants. The major accounting change was that the company used a cumulative amount based on all the assets depreciated by the old method. By retroactively combining the cumulative total, net
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reporting policy changes. Generally accepted accounting principles (GAAP) allow companies wide latitude in the choice of accounting policies. After a firm chooses a set of accounting policies, current accounting rules permit changes from one alternative policy to another at the discretion of the management. Since reported accounting figures are widely used by a number of external parties, managers of firms have incentives to choose accounting policies in order to influence the behavior of these
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