We shall follow the government's conclusions and, accordingly, fix the sum of $582,481, representing 5.72 per cent. of the value of the depreciable property ($10,183,240 depreciated physical property, less land) in our rate base as the amount to be procured annually and set aside in a depreciation reserve. REVENUES AND EXPENSES. Because of the criticisms made of the operations of public utilities, particularly with reference to their expenditures, most of which were generated by ignorance of the conditions under which the accounts of such utilities are kept, a brief reference to the accounting practices of the telephone company may, with propriety, be made at this point. From the inception of the telephone industry until January 1, 1923, standard accounts for the particular telephone companies were developed by accountants of the system. In the infancy of the business when development was restricted and construction was not particularly complex, the accounts required were simple. As early as 1884, however, the American Bell Telephone Company was endeavoring to establish uniformity in accounting practice among its associated companies, and in 1887, 1891, 1904, 1908 and 1910, the accounting systems were greatly amplified and expanded in endeavoring to reflect the operation. On June 18, 1910, the Act to Regulate Commerce was amended to give the Interstate Commerce Commission jurisdiction over telegraph, telephone and cable companies engaged in interstate business and to grant extensive control over the management, accounts, records and reports of such companies. By this Act the Commission is empowered to "prescribe the forms of any and all accounts, records, and memoranda to be kept The Commission shall at all times have access to all accounts, records and memoranda kept by carriers subject to this Act, and it shall be unlawful for such carriers to keep any other accounts, records or memoranda than those prescribed or approved by the Commission, and it may employ special agents or examiners, who shall have authority under the order of the Commission to inspect and examine any and all accounts, records, and memoranda kept by such carriers." [Mor C. L. 148] The Act further states: "In case of failure or refusal on the part of any such carrier, receiver, or trustee to keep such accounts, records, and memoranda on the books and in the manner prescribed by the Commission, or to submit such accounts, records, and memoranda as are kept to the inspection of the Commission or any of its authorized agents or examiners, such carrier, receiver, or trustee shall forfeit to the United States the sum of $500 for each offense and for each and every day of the continuance of such offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this Act. "Any person who shall wilfully make any false entry in the accounts of any book of accounts or in any record or memoranda kept by a carrier, or who shall wilfully destroy, mutilate, alter, or by any other means or device falsify the record of any such account, record, or memoranda, or who shall wilfully neglect or fail to make full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the carrier's business, or shall keep any other accounts, records, or memoranda than those prescribed or approved by the Commission, shall be deemed guilty of a misdemeanor, and shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000, or imprisonment for a term not less than one year nor more than three years, or both such fine and imprisonment." Acting under the powers granted them by Congress, the accountants of the Interstate Commerce Commission proceeded to the formulation of a uniform system of accounts for telephone companies. In effective cooperation with the representatives of telephone companies and with state regulatory bodies, a tentative system was drawn up and issued under date of November 15, 1911. During the year 1912 more conferences and hearings were held and briefs were filed; and finally, the Uniform System of Accounts for Telephone Companies was issued by the Commission on December 10, 1912,* effective January 1, 1913. All telephone companies having annual operating revenues exceeding $50,000 are required by law to conform to this system of accounting. This Commission has adopted a classification of accounts for telephone companies of the size of defendant companies, which is nearly identical with the federal system. See 3 C. T. C. 28. [Mont. It follows that all the operations of the defendant company are, by force of the law, recorded under the supervision of the Federal Commission and the Public Service Commission of Montana. We have made studies of the company's accounts reflecting operation for the year 1922, for the purposes of obtaining net operating results based upon (a) appraisal value, or reproduction new value; (b) structural value, or reproduction new, less depreciation; and (c) book costs or book value. These studies, strictly following the company's books, manifest the following results: |