POSSIBLE PROCEDURES IN FIXING RATES «3 
Amortization During the Probable Life Term. — When only 
a single article is involved, as in the case of a steamboat, the 
disadvantage of adopting the plan of amortizing its cost or of 
providing a replacement fund in the exact term of its probable 
life is apparent. The steamboat may meet with an accident in 
the early years of its life. If it does and is replaced with a 
new one, amortization of the remaining value of the first steam- 
boat plus the amortization of the cost of the new steamboat will 
be necessary. The burden will fall upon the rate-payer. Under 
the alternative plan of continuing a uniform annual amortization 
allowance during the actual term of the steamboat’s service 
there will be no effect apparent upon the required earnings by 
an early failure of the steamboat. The loss of the first steam- 
boat will fall upon the owner, but, if rates are equitably estab- 
lished, the loss will be made good to him in the course of time 
by reason of the survival of other steamboats and the continu- 
ance of the depreciation or amortization allowance after original 
cost has been amortized. 
The wise plan is the one in which there is the least disturb- 
ance of the rates and in which, so far as may be, the required 
earnings will be least in the early years. 
The Book Accounts Under Various Methods of Procedure. — 
The book accounts relating to the foregoing tabular illustration 
when numerous articles all with a probable life new of 5 years 
are involved would show the following for each $100 of original 
investment: 
a. Sinking Fund Method with a replacement allowance for 
the term of the probable life of each article, regardless of the 
time of its actual failure. (Each article which replaces a fail- 
ing article is here treated as a new article.) 
Dr. side of Ledger Cr. side of Ledger 
1st yr. To depr. or amort. allowance $17.74 By renewals $4.00 
2nd yr. To int. on balance $13.74 0.82 
To depr. or amort. allowance 18.45 By renewals 8.16 
3rd =. To int. on balance 24.85 1.49 
To depr. or amort. allowance 19.89 By renewals 12.65 
4th yr. To int. on balance 33.58 2.01 
To depr. or amort. allowance 22.13 By renewals 17.64 
IJK