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Mr. Knickerbocker: #2 May 10, 1932 While we do not have a complete record of accruals of valuation and depreciation in different periods, we find on Jan­uary 1, 1924 the book value of our water system was $16,509.86. During that year, under Work Order VP-12, we renewed and enlarged about half of our system in Clark1s las Vegas Townsite, total cost $20,542.75, and charged Investment Accounts with $3,540.88, the balance of expenditure being charged to O.E., so on December 31, 1924, valuation was shown as $20,050.74. Accrued depreciation at the same time was $16,274.71 which amount had been accrued prior to December 1920. The charge of $17,001.87 to O.E. was based on Auditor's letter of November 15, 1923, file D-301. In 1926 we renewed practically all of the rest of the water lines in Clark's Las Vegas Townsite and a eharge was made to O.E. under Work Order VP-31 of $17,598.28. On December 31, 1926, General Balance Sheet shows a ledger value to the water system of $20,050.74. It seems to me that it is self evident that after the expenditure of $38,141.03 renewing and enlarging the old water system, that the book value of the system at the close of this work should represent the actual value instead of the amount shown on the General Balance sheet. These accounts should be capitalized for two reasons: (1) This Company is entitled to earn a profit on all investments, and unless these amounts are properly shown in the investment ac­counts, it is practically impossible to justify an earning on it. (2) The full value of the property should be established for the purpose of accruing funds for retirement. Otherwise when the full book value has been retired, the amount accrued for retire­ment will not be sufficient to cover the cost of replacement. If you concur in my views, will you please refer the matter to Mr. Barry, in order that he may take the necessary steps to correct our General Accounts. Yours truly, MLTEB B. BRACKEN, Vice President and Agent, ec -Mr. J. L. Haugh. n