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.
Use this rubric to guide your work.
|Tasks |Accomplished |Proficient |Needs Improvement |Not Acceptable |
|Assignment |Insightful response |Reasonable response |Response demonstrates some |Superficial response |
|(5 points) |demonstrates ample evidence |demonstrates evidence of ...view middle of the document...
1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.
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?
3. What is the effect of the depreciation lives change? How will this change affect future reported profits?
4. The depreciation accounting changes assume that Harnischfeger’s plant and machinery will last longer and will lose their value more slowly. Given the business conditions Harnischfeger was facing in its primary industries in 1984, are these economic assumptions justified?
5. In Note 7, Harnischfeger describes the effect of LIFO inventory liquidation on its reported profits in 1984. Describe what is meant by LIFO liquidation and how liquidation affects a company’s income statement and balance sheet.
6. Note 8 states Harnischfeger’s allowance for doubtful accounts. Compute the ratio of the allowance to gross receivables (receivables before the allowance) in 1983 and 1984. What would the allowance have been if the company maintained the ratio at the 1983 level? How much did the pre-tax income increase as a result of the changed ratio in 1984?
7. Note 9, on page...