The Accounting Principles And Procedures

(a) Compute depreciation expense for 2011 and 2012 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining balance method.

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?

This method is appropriate to the company because its calculation is easier and less tedious as compared to other methods like reducing balance method. By using this method, correct value of depreciation will be represented

> Depreciation affects the balance sheet through accumulated depreciation, which companies report as a deduction from plant assets. It affects the income statement through depreciation expense.

In 1984, Harnischfeger changed its depreciation policy for financial reporting purposes to a straight-line method from a principally accelerated method. A net income of $11 million was realized for 1984 when the straight-line method was applied retroactively to all assets depreciated under the accelerated method. The management viewed this as an approach to match the company’s standard with that of industry peers. We

Student Cases with Solutions to accompany Accounting & Auditing Research: Tools & Strategies (7th edition)

For the depreciation part, we adopted the straight-line method. Here since the depreciation of year 1984 was $1270, we just assumed all the depreciation amount to be equal to $1270 till the year 1989. With all of these previous assumptions, we obtain the complete pro forma financial statement and the cash flow table for the Collinsville Plant.

I decided to do my research on Sony due to the advancement in technology and the competition between companies such as Microsoft, Apple, and Sony. I have been around long enough to know about Sony’s products but the real reason that attracted me to them for this essay is because I actually believe that they are having a negative trend. I am starting to see less Sony items in stores and I haven’t really heard much about them. Whereas companies such as Apple are constantly being talked about and you often see people walking around with some type of apple product in their hands. Today we are going to research Sony through a horizontal analysis and through different ratio analyses. Let’s see what we find!

cognizant of the fact that the choices he makes can affect the price a buyer pays

* Harnischfeger retroactively changed its depreciation method from accelerated to straight-line for all depreciable assets. The cumulative effect of this accounting policy change, which not including the reduction in the current year’s depreciation expense, increased after-tax net income for 1984.

Depreciation method was changed to straight line method from accelerated method. This policy change increased the income of year 1984 by $ 11 Million.

Depreciation involves spreading the cost of an item over several years or over its useful lifetime. This is an accounting of the reduction in value of the merchandise and it will be reflected as an expense on the company’s income statement. Therefore, this is important because nothing holds its full value over time and organizations need to account for the devaluation. Accountants and financial officers follow GAAP guidelines to determine depreciation. The depreciation of an item is an estimated guess not a proven reality.

The value of fixed assets typically decreases over time. The amount of the decrease each year is accounted for and is called depreciation. Depreciation for the year is expensed on the income statement and added to the accumulated depreciation account on the balance sheet. So the value of the fixed assets on the balance sheet is reduced by the accumulated depreciation.

In this example we have a case in which years 89, 90 and 91 net income is less than net cash provided by operating activities. One of the major reasons for this appears to have been depreciating high cost of equipment. The depreciation is trending downward over the three-year period indicating less long-term assets are being purchased/capitalized to run operations. While depreciation does not involve cash, it does impact net income. In addition, account payables have been decreasing over the last two years and significant cash has been used in the last year to pay the liability. In 1990 there are significant costs associated with restructuring activities. There

If the depreciation method changes from straight-line method to accelerated method then, depreciation expense would be increase and net income would decrease. The EPS ratio would represent a loss of $0.19 per share.