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; V well as the cast Iron piping laid by the L V L andWCo., to which the rate was applicable. The wood pipe laid in 1924 and the purchased lines having been replaced with cast iron in the last two or three years, it follows that depreciation a c c r u a l s •have not been adequate-to account for all the property retired. The annual depreciation rate was changed to 1 1/4$, effective January 1, 1941. This appears adequate for the present cast Irdn pipe, allowing for it a service life of 80 years. It also 1s adequate to build up a reserve against which may be charged the cost of future replacements. The depreciation reserve in the past has not been charged with the cost of property retired in connection with replacements. Such changes were a c c o u n t e d for on a betterment basis, i.e., the estimated current cost to replace the property retired was charged direct to oper­ating expenses and only, the excess cost of the cast iron pipe laid In its place over the cost at current prices of the discarded wood pipe was capitalized. Obviously such accounting hes been advantageous from an income tax viewpoint. The composition of the amount paid annually as rent for the Joint use of LA&SL springs, wells, pipe lines, etc., la Indicated by the following example applicable to the calendar year 1939: Valuation of property January 1, 1936 $193,336.27 Changes during the year Total at January 1, 1939 T 9 3 . 3 3 6 . 2 7 Water used in 1938: For railroad purposes 108,060,353 gallons For LVLandWCo. 776.082.840 " 884, 143,T53 " Interest on $193,336.27 at 6# Depreciation " at 4$ Insurance / Taxes . 11 at 1.75# Maintenance and operation cost $11,600.18 7,733.45 25.00 3,383.38 628.34 237370735 12.22# 87.78# 100.00# LVLandWCo. - - 87.78# $ 20,514.48 9 (