Account 325
Essay Preview: Account 325
Report this essay
ACC 613
Chapter 3: Harnischfeger Case
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 companyпіÐs 1984 reported profits.
Harnischfeger made the following accounting policy changes and accounting estimates during the year 1984.
піЅ There was a change in the recognition of some types of sales. This resulted in a change in sales calculation. Harnischfeger incorporated products purchased from Kobe Steel, which were re-sold by the company, into its net sales. This increased aggregate sales and cost of sales by $28 million.
піЅ There was a change in the fiscal year for some foreign subsidiaries.
піЅ There was a change in the depreciation methods on assets. The depreciation policy for financial reporting purposes was changed to a straight-line method from a principally accelerated method.
піЅ There was a change in the use of last-in, first-out (LIFO) liquidation in inventory valuation.
піЅ There was a change in the allowance for doubtful accounts. The company adjusted its allowance for doubtful accounts to 6.7% of sales for 1984 from 10% of sales in 1983.
піЅ There was change in the R&D expenses. Harnischfeger significantly reduced its R&D expenses to $5.1 million in 1984, from 412.1 million in 1983.
піЅ There was change in employee pension plans. The Salaried Employee Retirement Plan was terminated in 1984 and a new plan was created.
The effect of the accounting policy changes on the companyпіЅs 1984 reported profits are as follows:
піЅ