POSSIBLE PROCEDURES IN FIXING RATES 173
same probable life when new, some will actually serve a shorter
and others a longer time, let it be assumed that a group of
articles is under consideration whose average life, and therefore
whose probable life, is 5 years. Let it be further assumed in
order to give definiteness to the problem that there will go out
of use and be replaced 4 per cent of these articles at the end of
the first year; 8 per cent at the end of the second year; 12 per
cent at the end of the third year; 16 per cent at the end of the
fourth year; 20 per cent at the end of the fifth year; 16 per cent
at the end of the sixth year; 12 per cent at the end of the seventh
year; 8 per cent at the end of the eighth year; and 4 per cent at
the end of the ninth year.
This hypothesis of failures has already been referred to and
its basis explained in Chapter VI. Two courses are open.
Either the allowance for amortization or so-called depreciation
is extended for each article throughout the period of its probable
life, regardless of whether the article fails early or survives, or,
as an alternative, the annual allowance of amortization or depreciation
 is continued throughout actual life and stops with the
failure of each article. Each article which takes the place of
another which is discarded is supposed to receive the same
consideration and the same treatment in the accounts as an
original article.
The result is shown in Table 10.
Explanation of Table 10. — In Table 10 there is noted for the
Equal Annual Payment Method in column A the amortization
requirement computed from amortization tables, entering the
tables not with age, but with probable life new less the expectancy;
 and in column B, the amortization requirement as determined
 from Table 20 by taking the difference between the remaining
 value at the beginning of successive years, giving, as
explained, consideration to the new articles introduced each year
to replace discarded articles. When amortization of capital continues
 during the actual life of each article, terminating when
the article goes out of use, the Equal Annual Payment Method
is no longer, strictly speaking, an equal annual payment method