POSSIBLE PROCEDURES IN FIXING RATES 177
At the end of the tenth year there would be in the replacement
fund $23.55 for each $100 of original investment.
¢. The amortization and replacement account in the case of
the Equal Annual Payment Method, if amortization be allowed
during the probable life term of each article, regardless of whether
the article fails early or survives, would be about as follows:
(Every article which replaces another is here treated as a new
article.)
Dr. side of Ledger Cr. side of Ledger
1st yr. To allowance for amort. and repl. $17.74 By renewals $4.00
2nd yr. To allowance for amort. and repl. 19.5I By renewals 8.16
3rd yr. To allowance for amort. and repl. 22.1 3 By renewals 12.63
4th yr. To allowance for amort. and repl. 25.72 By renewals 17.64
sth yr. To allowance for amort. and repl. LY ) By renewals 23.34
Totals $115.50 $55.79
Balance NO $59.71
Balance $50.71
6th yr. To allowance for amort. and rep. 12.63 By renewals $21.97
7th yr. To allowance for amort. and repl. 16.32 By renewals 21.16
8th yr. To allowance for amort. and repl. 19.11 By renewals 20.54
oth yr. To allowance for amort. and repl. 20.98 By renewals 19.73
roth yr. To allowance for amort. and repl. 21.46 By renewals 18.31
Totals $150. 21 $101.71
Balance _ 48.50
The amount available for amortization at the end of the fifth
year should be according to this account about $50.71 for each
$100 of original investment and $48. 50 at the end of the tenth
year. In actual bookkeeping the account would have been
balanced at the end of each year. The remaining investment,
or the present value, is shown by this account to have been
$40.29 on each $100 at the end of the fifth year and $51.60 at
the end of the tenth year. The large reduction of capital which
results from this method of applying the Equal Annual Pay-
ment Method shows its undesirability.
d. The amortization and replacement account in the case of
the Equal Annual Payment Method, if amortization be esti-
mated during the actual life of each article (plan A, Table 10)
and the balance is applied at the end of each year to retire
capital, would show:
