Premium Essay

Week 4: Harnischfeger Inc.

In:

Submitted By acif
Words 774
Pages 4
Week 4: Harnischfeger Inc.
1. Describe clearly all of the accounting changes Harnischfeger made in 1984.
1. There is a change in the depreciation method. They change from accelerated depreciation to straight line method. Because they change for the accelerated depreciation to straight line depreciation the will record lower cost. This will lower the total cost en thereby increase the net profit.
2. The estimated depreciation lives of the 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 depreciation cost. Thereby they also changed the estimated depreciation live form the asset in U.S.. This could be done for lowering the depreciation cost. Because the way of calculating the straightline depreciation cost depends on the estimeted live of the assets the management could extend the estimaten depreciation live to lower the anually depreciationcost.

3. What is the effect of the change in depreciation lives? How will this change affect future reported profits?
The changes of the estimated depreciationlives wil affect the anually depreciation cost.
The starigth-line depreciation is calculated by the remaning book value of the assets devided by the remaning estimanded live of the assets. By extending the live of the assets the cost will be lower. This will lower the total cost which cause an higher net profit.

4. The depreciation accounting changes assume that Harnischfeger’s plant and machinery will last

Similar Documents

Premium Essay

Notes

...The University of Illinois Executive MBA July 13, 2004 Tentative Syllabus Managerial Perspective on Financial Accounting Accountancy 401X; Fall 2004 Michael J. Sandretto, 225C David Kinley Hall (217) 244-6410 (office); (217) 352-4832 (home, before 10:30 p.m.) sandrett@uiuc.edu or michaeljsandretto@earthlink.net Texts: Antle, Rick, and Stanley J. Garstak, Financial Accounting, Southwestern (United States), second edition, 2004 (Antle). Palepu, Krishna G., Paul M. Healy, and Victor L. Bernard, Business Analysis and Valuation: Using Financial Statements, Text Only, Southwestern (United States), fourth edition, 2004 (Palepu). Background: Accounting is called the language of business for at least two reasons. First, accounting terms such as sales, revenues, profit, net income, costs, gross margin, expense, and capitalize are widely used in business. Any businessperson is expected to understand those terms. Second, managers rely on accounting to understand an organization’s economic condition at a point in time and its economic performance over a period of time. As a result, they use accounting information to communicate with others. Managerial Perspective on Financial Accounting will help you understand publicly available financial statements for publicly traded companies and financial statements prepared for internal use. It is also an introduction to financial statement analysis and valuation methods. The basic financial accounting methodology...

Words: 2809 - Pages: 12

Premium Essay

Innovator Dillema

...technologies cause great firms to fail / Clayton M. Christensen. p. cm. — (The management of innovation and change series) Includes index. ISBN 0-87584-585-1 (alk. paper) 1. Creative ability in business. 2. Industrial management. 3. Customer services. 4. Success in business. I. Title. II. Series. HD53.C49 1997 658—DC20 96-10894 CIP ISBN 0-87584-585-1 (Microsoft Reader edition) 3 Contents In Gratitude Introduction PART ONE: WHY GREAT COMPANIES CAN FAIL 1 How Can Great Firms Fail? Insights from the Hard Disk Drive Industry 2 Value Networks and the Impetus to Innovate 3 Disruptive Technological Change in the Mechanical Excavator Industry 4 What Goes Up, Can’t Go Down PART TWO: MANAGING DISRUPTIVE TECHNOLOGICAL CHANGE 5 Give Responsibility for Disruptive Technologies to Organizations Whose Customers Need Them 6 Match the Size of the Organization to the Size of the Market 7 Discovering New and Emerging Markets 8 How to Appraise Your Organization’s Capabilities and Disabilities 9 Performance Provided, Market Demand, and the Product Life Cycle 10 Managing Disruptive Technological Change: A Case Study 11 The Dilemmas of Innovation: A Summary The Innovator’s Dilemma Book Group Guide About the Author 4 In Gratitude Although this book lists only one author, in reality the ideas it molds together were contributed and refined by many extraordinarily insightful and selfless colleagues. The work began when Professors Kim Clark,...

Words: 82673 - Pages: 331

Free Essay

Besanko

...Chapter 1 The Evolution of the Modern Firm Chapter Contents 1) Introduction 2) The World in 1840 • Doing Business in 1840 • Conditions of Business in 1840: Life Without a Modern Infrastructure Example 1.1: The Emergence of Chicago 3) The World in 1910 • Doing Business in 1910 Example 1.2: Responding to the Business Environment: The Case of American Whaling • Business Conditions in 1910: A "Modern" Infrastructure Example 1.3: Evolution of the Steel Industry 4) The World Today • Doing Business Today • The Infrastructure Today Example 1.4: Economic Gyrations and Traffic Gridlock in Thailand 5) Three Different Worlds: Consistent Principles, Changing Conditions, and Adaptive Strategies Example 1.5: Infrastructure and Emerging Markets: The Russian Privatization Program Example 1.6: Building National Infrastructure: The Transcontinental Railroad 6) Chapter Summary 7) Questions Chapter Summary This chapter analyses the business environment in three different time periods: 1840, 1910 and the present. It looks at the business infrastructure, market conditions, the size and scope of a firm’s activities and a firm’s response to changes. This historical perspective shows that all successful businesses have used similar principles to adapt to widely varying business conditions in order to succeed. Businesses in the period before 1840 were small and operated in localized markets...

Words: 81132 - Pages: 325