upr000342 27

•4- annual depreciation e xpense. Such depreciation deduction is either that set up on the books or as computed as the reserve requirement* In addition, these fixed capital accounts have been lessened for Amortization of Defense Plant Properties and for Donations in Aid of Construction. Since the magnitude of these latter items is compara­tively large, the disposition of these is fairly important and some special discussion is believed warranted. Amortization of Defense Plant Facilities: On the Balance Sheet as of 12/31/49 this item, under Account 175, stood at $160,482.97. Historically, this capital was amortized and the following sets f©rifethe amounts, along with net earnings and other pertinent informa­tion, as follows: It thus appears that Defense Capital amortized through charges to operating expenses daring the four years 1942-1945 inclusive, was done at the sole expense of the stockholders. The problem to decide is - How shall this $160,483 be treated in computing the present and prospective earnings of the Water Company. 1942 1943 Net After Amortization $4,782 197129 7,342 17,920 Net before Amortization Amortization Expense 7,342 l'Less 1st. Income Taxes 3.170 Net before Amortization 8,954 Net to Tbld 6% and Income Taxes T2’’124 27~059 ,ess IA.n.__c_o_.mJ.e.* __T_a__x_e__s— 3,170 r w*9w,i2 »00 TT,770 -23,041 " 177349* on Investment 12,400 17,700 19,200 25,000 (1) Limited to normal and sur-taxes estimates