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Calculate harnishfegers sustainable earnings

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Reference no: EM132836961

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.

  • It disclosed the cumulative effect of this accounting policy change, equal to $11.005 million (net of applicable income taxes), in its financial statements.
  • 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: EM132836961

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