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In conditionally restating the investment in road and equipment account of the Elberton Southern Railway Company we deducted $266,288.86 with the explanation that it represented the recorded value of assets other than road and equipment taken over in the acquirement of its property. This carrier protests that the restated investment account should be corrected by restoring thereto an amount of $162,688.86, leaving a net deduction of only $103,600.

On December 1, 1908, the property of the Elberton Air Line Railroad Company was sold for $581,252.18 to Henry V. Poor, agent for holders of certain of its bonds and stock, who conveyed it on December 2, 1908, to the Elberton Southern in consideration of the agreement of the latter to issue $200,000 par value of capital stock and $250,000 par value of first-mortgage bonds. The investment in road, including land, no equipment being owned, on that date was stated in its books as $346,400. Prior to December 2, 1898, expenditures purporting to be for additions and betterments to the property amounting to $114,004.78, had been charged to the profit and loss account. This amount is not included in the recorded investment in road above referred to.

The general balance sheet of the Elberton Air Line Railroad Company as of June 30, 1908, shows capital stock $196,400, first-mortgage, 7 per cent bonds $150,000, and corporate surplus $234,852.18, or a total of $581,252.18.

On the date of demise of the Elberton Air Line Railroad Company the Southern Railway was indebted to it in the amount of $266,288.86, which amount exactly equaled the results of its corporate operations from 1878 to 1898. This amount was recorded in the accounts of the Elberton Air Line as investments in other companies.

The Elberton Southern, in opening its books as of December 1, 1908, charged to cost of road the par value of capital stock and bonds amounting to $450,000 and set up as an asset to the credit of profit and loss the amount of $266,288.86 owed to its predecessor by the Southern Railway at that time. On March 29, 1909, the Elberton Southern received $272,000 from the latter in full settlement of balances due to December 31, 1908.

Under an agreement dated December 2, 1908, Henry V. Poor transferred and assigned to the Southern Railway the $200,000 par value capital stock and $250,000 par value first-mortgage bonds received by him from the Elberton Southern for the property formerly owned by the Elberton Air Line Railroad Company. This agreement recited that the purchase price was paid by the Southern Railway, it supplying $7,740.48 in cash, and $150,000 in bonds and $423,511.70 in stock of the Elberton Air Line Railroad Company. It is agreed that the consideration given by the Elberton Southern for the property of the Elberton Air Line, including the asset of $266,288.86, was $450,000

par value of securities issued by the former. The carrier, however, argues that the adjustment made by us in restating the investment account is not warranted, stating that this property, upon the improvement of which $114,000 of surplus earnings had been expended, could not by any process of bookkeeping be made to represent an investment of only $183,711, thus leaving only $69,711 as representative of the investment in the property prior to its improvement. It directs our attention to the fact that the purchase price was identical with the amount of the outstanding securities and corporate surplus as of June 30, 1908, or $581,252.18. In support of its contention it asserts that by the date of demise the corporate surplus, representing the unexpended or undistributed results from corporate operations in the hands of the Southern Railway, had increased so as to bring the comparable valuation of the old securities for which the new were issued in exchange up to $612,688.86. Deducting therefrom the asset of $266,288.86 the carrier secures a net figure applicable to road of $346,400 which it compares with the recorded investment of $450,000 and concludes from this computation that the investment account is overstated only $103,600.

The bureau takes the position that had the asset other than road been properly recorded at the time of acquisition there would have been left for the recorded investment in road $183,711.14, which represents the difference between the recorded amount of considerations given for the property, $450,000, and the recorded amount of assets acquired other than road, $266,288.86. There is no evidence to show how much, if any, of the $114,004.78 alleged to have been expended for additions and betterments was properly chargeable to investment.

In connection with account 41, Cost of Road Purchased, in our accounting classification, it is provided:

This account shall include the cash cost of any road or portion thereof purchased. Where the contract of purchase includes not only road, but also equipment, securities, and other assets, the appraised value of such equipment, securities, and other assets shall be deducted from the total cash cost, and the remainder of the cash cost shall be charged to this account. Where the consideration given for the property purchased is other than cash, such consideration shall be valued on a current cash basis. * * *

We have restated the investment account of the Elberton Southern strictly in accordance with our accounting classification. From the facts of record we are satisfied that the deduction of $266,288.86 from the investment in road and equipment account of the Elberton Southern is proper and it is therefore approved.

During the period from July 1, 1894, to date of valuation the carrier accrued interest during construction on its own funds used for

certain miscellaneous additions and betterments and improvements to its property which was charged to the investment in road and equipment account in the amount of $1,489,976.78. We reported this fact in our analysis of its recorded investment in road and equipment in the tentative valuation. This analysis further showed a recorded money outlay of $84,188,502.35 for additions and betterments to date of valuation which was charged to the investment in road and equipment account. The carrier now contends that its investment in road and equipment and improvements on leased property accounts should be adjusted to include for interest during construction additional amounts of $1,097,480.24 and $232,989.77, respectively. It alleges that it made certain expenditures purporting to have been for additions and betterments and which were charged to income, profit and loss, and operating expenses accounts, and stated that full details of these expenditures are available in its office from which a complete check of its claim can be made. The total amount contended for was determined by computing interest at the rate of 6 per cent per annum on an aggregate principal amount of $43,315,276 for an average period of 7.14 months, less an amount representing interest applicable to the month during which the property was put in operation, or representing the interest on the cost of projects requiring less than one month to construct. We have herein before disapproved the inclusion in the carrier's investment account of certain items of cost alleged to represent additions and betterments to this property, which items have been used in the carrier's computation. The contention of the carrier is overruled.

In our conditional restatement of the investment in road and equipment account of The Georgia Midland Railway Company, an item of $602,500 was deducted as the amount of discount suffered on an issue of $1,402,500 par value of first-mortgage, 50-year, 3 per cent gold bonds. Protest is made against this deduction. The Georgia Midland issued at its organization $1,800,000 par value of securities in part payment for the property of its predecessor company, The Georgia Midland & Gulf Railroad Company. These securities included $1,000,000 capital stock and $300,000 and $500,000 firstmortgage and income-mortgage bonds, respectively. The par value of these securities was charged to the investment in road and equipment account. On June 18, 1896, the Georgia Midland entered into a lease agreement with the Southern Railway, under the terms of which it was required to rearrange its finances and to that end it executed a new mortgage securing its first-mortgage, 50-year, 3 per cent gold bonds, dated April 1, 1896, in the par value of $1,650,000. Certificates of a par value of $1,402,500 were issued to reacquire the $800,000 par value of funded debt previously issued in part payment for the property of the Georgia Midland & Gulf, and the excess,

amounting to $602,500 par value over the par value of bonds retired, was charged to the investment in road and equipment account. It appears therefore that the excess of $602,500 does not represent any part of the true investment in the property acquired and the charge of this item to the investment account was erroneous.

The carrier and certain of its affiliated lines contend that there have not heretofore been included in, and should now be added to, their investment in road and equipment and improvements on leased railway property accounts specified amounts representing the estimated values at time of acquisition of the rights of way and other road and equipment property donated to them. These amounts cover property acquired prior to July 1, 1914, except that $5,354.32 and $54,034.76 contended for by the Virginia and Southwestern and the Cincinnati, New Orleans & Texas Pacific respectively, represent property acquired subsequently to that date. These various carriers state that they have received land and other property having values aggregating the amounts claimed as compensation for according special freight receipt and delivery privileges to industries along their lines. These carriers have included in response to our valuation order No. 7, pertaining to lands, certain parcels acquired from industries for the purpose of constructing industrial tracks thereon. They did not include, however, any of the items contended for in their returns relating to aids, gifts, grants, or donations. The values which these carriers ask us to accept as being those at the time of acquisition represent appraisals made many years after the property had been acquired.

In our accounting classification effective July 1, 1914, we incorporated a rule providing, among other things, that the investment accounts shall be charged with the estimated values at time of acquisition of right of way and other road and equipment property donated to the carrier, except that unless authorized by us no charges shall be made to these accounts after July 1, 1914, for donations received prior to that date. Although many years have elapsed since the above rule became effective there apparently has been no attempt made by these carriers to avail themselves of its provisions and secure proper authorization from us to make these charges to their investment accounts, and the evidence now presented does not establish the propriety of the amounts claimed as the value of the property donated.

In our conditional restatement of the investment account of the New Orleans and Northeastern Railroad Company we deducted an amount of $1,954,200 from the recorded investment account as not being in accordance with our present accounting classification. This item is described as interest on funded debt, prior and subsequent to the construction period, inseparable, originally charged to the income

account, transferred to debit of the investment in road and equipment account with offsetting credit to profit and loss. The carrier con tends that this deduction is in error. The accounting records of the carrier show that included in the $1,954,200 referred to there is an item of $797,885.09 representing interest accrued to December 31, 1885, on advances received from an affiliated company. The owned mileage of this carrier, 195.528 miles, was all constructed for it by the Alabama, New Orleans, Texas & Pacific Junction Railways Company, Limited, under an agreement dated July 16, 1881. The record shows that various sections of the railroad were acquired and opened for operation on different dates between October 25, 1882, and November 1, 1883. The records do not separately record the interest accrued prior to the opening for operation of the various sections of the road from the interest accrued subsequently thereto. On June 17, 1902, the New Orleans and Northeastern was indebted to the Alabama, New Orleans, Texas & Pacific Junction Railways Company, Limited, in the sum of $1,967,377.90, consisting of a debt due on construction account for first-mortgage interest to July, 1887, of $1,069,517.80 and arrears of interest on $4,900,000 of 6 per cent, first-mortgage bonds upon coupons matured subsequently to July 18, 1898, amounting to $897,860.10. This indebtedness was liquidated through the issuance of securities at par value in the amount of $1,954,200, consisting of $1,000,000 in common stock and $954,200 of 4.5 per cent, gold, income-mortgage bonds. The New Orleans and Northeastern in a report to its stockholders for the year ended December 31, 1885, showed that an agreement was made with the majority holders of its bonds above mentioned whereby they would accept 4 per cent interest instead of 6 per cent during two years from July, 1885, to July, 1887, and that all interest accruing anterior to July, 1885, and the 2 per cent accrued from July, 1885, to July, 1887, was to be funded into a junior security.

Our classification of investment in road and equipment provides that when any interest-bearing debt is incurred in construction, the interest accruing on the part of the debt representing the cost of property chargeable to road and equipment accounts after the funds become available for use and before the receipt or the completion or coming into service of the property acquired shall be charged to this account. The record indicates that not all of the amount of $1,954,200 would be includible in a restatement of the investment account and we have not been presented with the requisite facts to enable us to estimate with reasonable certainty the amount that should be so included. The protest is overruled.

The New Orleans Terminal Company takes exception to a deduction of $770,690 for discount on funded debt in our conditional restatement of its investment account. The accounting records of

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