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Calculate harnishfeger sustainable earnings

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Measuring Sustainable Earnings

  1. Harnishfeger Corporation was a mining machinery and equipment company based in Wisconsin. The company voluntarily changed its depreciation accounting policy from the accelerated method to the straight-line method.
  2. It disclosed the cumulative effect of this accounting policy change, equal to $11.005 million (net of applicable income taxes), in its financial statements.
  3. In addition, the company also voluntarily changed the estimated useful lives of certain of its U.S. plant and equipment. This estimate change increased its pretax reported profit by $3.2 million.

The following are selected excerpts from the company's financial statements:(in thousands)

Income before income taxes, equity items, and cumulative effect of accounting method change $5,838

Provision for income taxes (2,452)

Income after taxes 3,386

Equity items 858

Cumulative effect of change in depreciation method 11,005

Net income $15,249

Problem (a) Calculate Harnishfeger's sustainable earnings.

Reference no: EM132794745

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