Harnischfeger

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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 for its plants, machinery, and equipment. 2.) In effect this policy shift retroactively resulted in an increase $11 million in net income or $0.93 per common and common equivalent share. Profits will improve. 3.) Also these changes resulted in the change of the depreciation lives on US plants, machinery and equipment. This had an effect on the residual values on certain machinery and equipment that increased net income for 1984 by $3.2 million or $0.27 per share. No income tax effect was applied to the change. Harnischfeger fixed assets useful life will increase as such profits will improve. 4.) The reduction in sales and the underutilization of plants, machinery, and equipment would have a prolonged effect on the assets useful life. 5.) The effect of LIFO inventory liquidation on its reported profits in 1984 are an increase in net income by $2.4 million or $0.20 per common share and a reduction in the net loss by $15.6 million. If a company performs LIFO liquidation, the old costs will be matched with the current higher sales prices. A company uses LIFO liquidation assuming that when it needs to replace inventory its repurchasing cost will increase. 6.) 1984 – 0.0673 or 6.73% 1983 – 0.1004 or 10.04%, the doubtful accounts allowance at 1983 levels would have been $8.8 million. The resulting change equates to roughly 500K increase in pre-tax…...

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