1. Read the footnotes carefully. Identify four accounting policy changes and accounting estimates that Harnischfeger made during 1984 and estimate as accurately as possible the effect of these changes on the company’s 1984 reported profits? One accounting change that Harnischfeger made was that they were going to include products purchased from Kobe Steel in their net sales. Before November 1, 1983 only the gross margin on Kobe products was included in their net sales. Harnischfeger was also going to include the financial statements of certain foreign subsidiaries were included on the basis of their fiscal years ended July 31 to September 30. Even though there was no significant impact on net income, this did help to increase their …show more content…
Do you believe investors in Harnischfeger will “see through” the company’s accounting changes? I believe that Harnischfeger’s management strategy was a good idea. It provided motivation and showed, through the financial statements, that the company was able to make a profit again. Since the company increased net income this may lead investors to believe that the changes are part of a forward looking business strategy and could increase the company’s stock price . It does seem very suspicious that all of these changes occurred within a year and I think this will raise a lot of questions with their investors. The investors might think that the company is trying too hard to make their financial statements look good by their 100th anniversary. Investors might also find out that a lot of this motivation will come at a large cost, with having the top executive officers have incentive compensation. Investors might also be concerned that the company is decreasing the amount of R&D spending, but still trying to explore different high technology product lines and services. I would have thought with trying to do this they would want to spend more money on R&D. A final thing investors might notice is the extension of deprecation lives for their plants, machinery, and equipment. Although this is being done to increase their net income, this might not be such a smart strategy for the company. 4. Assess the company’s future prospects
1. Using the historical data as a guide, construct a pro forma (forecasted) profit and loss statement
Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements.
In 1984, Harnischfeger’s reported profits during each of the four quarters, ending the year with a pre-tax operating profit of $5.7 million and a net income after tax and extraordinary credits of $15 million. So I think that this action was motivated by business considerations, since the accounting practices were not the best. These actions made profits look positive.
2. Considering your answer to item 1, the first three exhibits, and related introductory discussion, is it likely that the accounting system may distort product profit significantly? Why? (Ignore general, selling, and admin expense.)
Harnischfeger also included the products purchased from Kobe Steel, LTD and sold by them in their net sales instead of stating only the gross margin per unit. They also included the financial statements of some foreign subsidiaries.
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.
The following additional facts are collected for use in making adjusting entries on December 31 prior to preparing financial statements for the company’s first three months. Journalize the following adjusting journal entries in the General Journal on page 6 and then post them to
If you work this problem as a group assignment, each group member should be prepared to
1. Discuss the environmental, strategic, and organizational changes that occurred over the life of Andersen in the context of Figure 11.1.
What is the impact of the December 1993 shipments of conventional lenses to Bausch and Lomb 1993 financial statements? Is the impact significant?
It would also reduce the risk of price increases by negotiating future prices. As shown previously, Harnischfeger was able to successfully reduce its cost to sales ratio. Through targeting new growth, emphasizing the high technology portion of its business and developing the Industrial Technologies Group, would create new business and ultimately increase sales for the company, which is shown in its financials, a 24% increase in sales from 1983 to 1984.
How did the competitive environment change for the John Deere Component Works between the 1970's and the 1980's? What information must management accounting systems provide to support effective decision-making in these different environments?
P. H. Glatfelter Company is a global manufacturer of engineered paper and specialty printing paper. The slogan, “Beyond Paper │it’s everything we do above and beyond making great paper−that’s what makes us unique,” explains what the company is all about. The company’s core values include being dedicated to the environment, and producing products that are environmental friendly. Glatfelter has more than one hundred and fifty years of experience, they have intelligence in technical facilities, and world class service. Glatfelter claims to have custom solutions for all customer needs. The company headquarters are located in York, Pennsylvania but there are locations in Fremont and Chillicothe, Ohio. Places outside of the U.S include Canada,
5. What was the effect on earnings per share of the change in depreciation method for 'hit" tapes (assume that hit tapes made up 25% of new tape purchases, and that the average hit tape was owned for half the year)?