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Harnischfeger

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1. The company began to include its net sales products purchased from Kobe Steel Ltd. and sold by the corporation in its financial statements instead of only reporting the gross margin on Kobe-originated equipment. Secondly, in 1984 they changed to a straight-line method to depreciate their plants, machinery and equipment. They had previously been using an accelerated method. With these two changes, the company was able to report an increase of net income of about $16.4 million dollars. 2. The depreciation accounting method change on the reported income in 1984 caused a net income increase of about $11 million or $0.93 per common share. Since they were previously using the accelerated method, which would have lowered the amount they depreciate every year, now, by using the straight-line 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 This might have a negative effect on efficiency and productivity due to outdated equipment.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 machines to breakdown due to their age. This will cause future reported profits to lower, which will have a negative effect on the overall reported profits. 4. According to their statement of operations, it can be seen that the company’s revenue was decreasing from 1982-1984. This decrease in revenue depicts the decrease for the company’s product, which means that the company will reduce the use of machinery which will increase the life span of the machinery. Since there is an increase of useful life in the assets, it justifies the change of depreciation method. 5. A LIFO

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