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map showing the surface boundaries of your property with reference to
contiguous properties, are appended.

Your management again wishes to express its appreciation of the
efficient services of the organization at Tonopafi and Millers.

By order of the Board of Directors.

Clyde A. Heller,

President

COMBINED BALANCE SHEET

ToNOPAH Belmont Development Company and Belmont Milling

Company

February 28, 1914

(MiNB AND Mill Regarded as One)

Assets
Property



Mines and mining claims




$2,010,959.16




Shafts, buildings, and machinery at mine


251,034.94




Millers mill




75,121.35




Tonopahmill




361,138.72


$2,698,254.17


Investments








Esmeralda Power Company




$ 25,000.00




Tonopah Mines Hospital Association


2.500.00




Interest in sundry patents




12,898.09


$ 40,398.09


Available assets








Materials and supplies for operation






Stores on hand at mine


$134,497.76






Stores on hand at mill


27,410.12


$ 161,907.88




Ore stock on hand








Ore on hand at mine


$ 39,540.78






Ore on hand at mill


4,626.46






In absorption at mill


107,750.40


151,917.64




Accounts receivable








Due from smelters


$277,388.30






Due from sundry parties


15,821.05






Cash in banks


991,920.09






Collateral loans


250,000.00


1.535,129.44




Total available assets






1,848,954.96


Charges paid in advance






2,964.21
$4,590,571.43



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20 . ACCOUNTS FOR MINING COMPANIES §37



Liabilities
Capital stock

1,500,000 shares of $1 each, fully issued
Current liabilities

Accounts payable

Unpaid wages

Accrued charges



$1,500,000.00



$91,052.10
44,753.16
18,592.64



Reserve for depreciation

Of mine and mill equipment
Balance of special reserve

After writing down the )30ok values of Tonopah mill and
of shafts, buildings, and machinery at mine
Undivided profits

Balance of net income available for the payment of divi-
dends or otherwise



154,397.90
176,378.66



633,031.54



2,126,763.33
$4,590,571.43



Having audited the books and accounts of the Tonopah
Belmont Development Company and of the Belmont Milling
Company, kept m the City of Philadelphia for the year ended
February 28, 1914, we hereby certify that the above Balance
Sheet is correct.

George Wilkinson & Compat^y,

Certified Public Accountants
Philadelphia, Pa.. March 26, 1914

COMPARATIVE STATEMENT OF OPERATING EXPENSES OP

MINE BY MONTHS

Tonopah Belmont De\^lopment Company

March 1, 1913, to February 28, 1914

COMPARATIVE TOTALS
March 1, 1912, to February 28, 1913





January


February


Totals






Amount


Amount


Amount Per Ton


Development direct










Miners


$ 8,504.61


$ 9,307.33


$ 87,650.63*


.508


Muckers and trammers


4,265.08


3,819.19


43,236.82


.251


Timbermen and helpers


2,118.69


1,160.67


19,542.86


.113


Stoping direct










Miners


7,272.12


7,142.30


92,218.73


.534


Shovelers


4,482.88


4,546.90


51,607.53


.299


Trammers


2,795.62


2,682.76


27,196.08


.158


Timbermen and helpers


8,902.27


8,669.86


114,321.67


.662


Filling


489.69


721.58


7,964.31


.046


Piston drills, repairs and










maintenance


261.37


343.12


7,985.06


.046


Stoping drills, repairs and










maintenance


308.10


405.39


5,736.50


.033


Steel and sharpening


1,410.41


1,423.42


15,775.33


.091


Explosives


7,715.96


7,843.45


75,116.88


.435


Hoisting to surface


3,072.22


2,879.13


44,477.99


.258


Auxiliary hoisting


184.72




6,650.97


.039


Ore sorting and loading


1,064.15


938.36


12,155.26


.070


Sampling and assaying


482.82


740.30


7,384.24


.043


Surveying


646.83


720.95


6,560.59


.038


Superintendent and shift











1,325.00 1,343.75 15,145.07 .088



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§ 37 ACCOUNTS FOR MINING COMPANIES 21





January


February


Totals


Per




Amount


Amount


Amount


Ton


Mine office


1,215.51


1,431.33


15,549.36


.090


Surface and plant


1,797.68


1,432.02


15,251.68


.088


Lighting


706.99


667.38


6,958.11


.040


Heating


826.86


754.31


8,632.08


.050


Drayage


200.45


222.20


2,837.79


.016


Maintenance and repairs










of buildings


106.25


33.06


687.44


.004


Maintenance and repairs











of machine and machine










tools


97.69


32.99


1,954.23


.011


Maintenance and repairs










of pipe lines and tanks


229.52


178.35


4,237.42


.025


Maintenance and repairs










of railroad spurs




15.60


60.12


.000


Pumping


1,452.92


1,754.98


20,284.80


.118


Ventilation


1,065.27


1,114.74


8,743.44


.051


Total cost direct mining


$63,001.58


$62,325.42


$725,922.99


4.205


Administration


817.54


834.06


10,213.16


.059


Taxes and insurance


1,489.30


1,462.98


17,488.09


.101


Legal and traveling ex-










pense


312.74


483.92


3,497.82


.020


Bullion tax




3,000.00


39,206.79


.22*/


Depreciation


1,252.37


1,252.37


15,028.44


.087


Total cost indirect mining


3,871.95


7,033.33


85,434.30


.494


Total operating cost


$66,873.53


$69,368.75


$811,357.29


4.699



* The figures in this column include those for the last 10 months of 1912, as well as
those for the 2 months of 1913 as shown.



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ACCOUNTS FOR INSURANCE
COMPANIES



LIFE INSURANCE



INSURANCE CONTRACTS

1. Insurance is a contract whereby, for a stipulated con-
sideration, one party agrees to compensate or indemnify the
other for loss on a specified subject iby a specified amount.
The insurer, sometimes called the underwriter, is the one
agreeing to indemnify. The insured is the one to whom the
promise runs. The premium is the agreed consideration.
The policy is the written contract. The risk, or peril, is
the event insured against. The Insurable interest is the
subject right or interest to be protected.

2. Life insurance is a contract to pay a designated or
determinable person a certain sum or an annuity in the event
of the death of the person whose life is insured. There are
numerous standard forms of life insurance, some of which have
proved more popular than others. The policy privileges may
be enumerated under the straight-life plan, and the endowment
plan,

3. The straight-life policy is one xmder which the insured
pays a given yearly premium for life, the cost of same depending
on his age at the time of taking the contract.

4. The endowment iK>licy is one under which the insured
will receive the face value if he lives a certain number of years

COPYRIOHTKO BY INTKRNATIONAL TKXTBOOK COMPANY. ALL RiaHTS RKSKRVKD

§38



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2 ACCOUNTS FOR INSURANCE COMPANIES § 38

and under which his heirs will receive the face value if he dies
before the expiration of that number of years. Under this
policy, the annual premiums must necessarily be higher than
under the straight-life plan; they may be made to extend over
the life of the poUcy or, on higher rates, over a shorter term.
For instance, a 20-year endowment policy may have the pre-
mium arranged to be paid over the entire 20 years or dtiring
the first 10 years. On either plan the policy is payable at once
in case of death.

Under the endowment plan, policies become paid up at a
given time, when, if desired, a new paid-up policy may be rewrit-
ten for a given amount or other options taken advantage of if
desired; for instance, one may elect to take all of the cash due
him under the cash-surrender policy, or he may take part cash
and paid-up insurance for a definite amount, or he may elect
to leave the entire amount in the company and receive annual
dividends for a given number of years thereafter.



METHODS OF CONDUCTING LIFE-INSI][RANCE
COMPANIES



STOCK PLAN

5. There are three recognized methods of conducting life-
insurance companies: the stock plan; the mutual plan; and the
mixed plan.

Under the stock plan the shareholders of the company, its
proprietors, guarantee that if the premitims charged prove
inadequate to pay all daims and expenses they will suffer the
loss. In order to make this guarantee good they must, there-
fore, provide their company with a substantial capital (in
addition to the assets contributed by the policyholders), so
that if during any year the insurance costs more than they
receive they shall have an adequate fund from which to make
up the deficiency. Also, as they take the chances of such a
loss, the shareholders are entitled to any profits that may
accrue.



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§38 ACCOUNTS FOR INSURANCE COMPANIES 3

6. The companies that do business on the stock plan arc
called proprietary companies because they are owned and
controlled by stockholders, the policyholdei's being simply cus-
tomers. Although this system is for this reason popularly
known as the stock plan, it is also designated the non-partici-
pating plan because tmder it the policyholders do not participate
in profits.

7. The two strongest argiunents advanced by the advocates
of the stock plan are: The stockholders, having embarked
a considerable amount of their own money in the business, will
manage it with caution and energy. Not only will the initial
cost to the insured be less, but the rate' can never by any possi-
bility exceed the rate originally charged.



MUTUAL PLAN

8. When the business is conducted on the mutual plan,

the policyholder ceases to be a mere customer and becomes a
sort of partner. The company may be said to be managed for
the benefit of policyholders exclusively. It is true that they
must pay higher premiimis than on the stock plan, but the
advocates cff the plan claim that the ultimate cost will be less,
because it will be reduced by dividends. The older mutual
companies have no capital (over and above their accumulated
assets) and the yoxmger companies have only a nominal
capital.*

9. The chief arguments advanced by the advocates of
mutual insurance are: The plan is absolutely safe, whereas
they daim that the stock plan is exposed to dangers that the

* An amendment to the laws of the State of New York, passed in 1853,
provided that all companies subsequently organized should have a capital
of at least $100,000 invested in government bonds (or other prescribed
securities) to be lodged with the government for the protection of policy-
holders. The incofporators of mutual companies since then, while comply-
ing with this law, have been able to organize their business on the niutual
plan by appropriate charter restrictions. In such cases, the authority to
vote for directors may vest in the holders of the capital, or the poj&cy-
holders may be given the right to vote, or stockholders and policyholders
may have joint control.



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4 ACCOUNTS FOR INSURANCE COMPANIES § 38

mutual company escapes. The ultimate cost to the policy-
holder is, or ought to be less, under normal conditions.

10. Popularity of Mutual Plan. — ^However opinions
may differ as to the merits of the three systems, it is a fact
that the bulk of the business has been transacted for a number
of years on the mutual plan by companies organized on the
mutual basis. There was a time when the stock plan was
exceedingly popular, and it is still popular, but during recent
years the volume of business done on the stock plan has been
small as compared with the volume transacted on the mutual
plan.

MIXED PLAN

11. A company conducted according to the mixed metliod

has a capital, which is usually large, in addition to its accumu-
lated assets. It offers its insurance on the participating plan.
That is to say, the premium charged usually corresponds with
that charged by the mutual company; and dividends are simi-
larly returned to the policyholder. But the company does not
agree to pay all the divisible profits to its policyholders; it
reserves a portion for the shareholders, who are owners of the
capital stock. Thus it will be seen that the mixed company
conducts its business substantially on the mutual plan, although
only a part of the profits go to policyholders, and although the
government is like that of the stock company.

12. The defenders of the mixed system daim the following
advantages: The government and control are as definite and
secure as in the case of the stock company. The zeal of the
shareholders will insure so successful a management that after
appropriating a moderate percentage of profits they will be able
to pay policyholders as large dividends as could a purely mutual
company. The large amoxmt of capital stock provides addi-
tional security for policyholders.



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§38 ACCOUNTS FOR INSURANCE COMPANIES



INSURANCE BESEBVE

13. The reserve is the amoxint required by law for an
insurance company to have on hand in substantial assets to
enable the company to carry out its contracts with policy-
holders. As the company enters into contracts whereby it
agrees to pay to the insured definite amotmts at death or at
certain times, as at the end of, say, 10 or 20 years, it must set
aside for each obligation such amoimts as will equal said
obligation when it matures. The annuities set aside draw
interest and are usually invested in good securities. The law
requires that the reserves shall be figiu^ at conservative rates,
either 3 or 3i per cent., according to actuaries' mortality tables,
and the lower the rate the greater the amount to be reserved
each year. Death claims, according to the mortality tables,
average so many per year to the thousand; therefore, the com-
pany must so arrange its income and reserves as to pay these
claims and still provide for expenses, dividends, and surplus
profits.

New obligations are constantly being entered into and a
continuous flow of premium money is being received, so it is
impossible at any one time to say how much the reserve amounts
to. The burden of keeping the reserve in condition devolves
upon the actuarial department, and in estimating correct
amounts every policy issued must be considered and averaged.
The members of this department estLffiate that such a portion
of the annual premium on each policy must be set aside as will
be required to accumulate the face value of the policy at the
estimated due date. Reserves, as such, are non-ledger accounts,
that is, they do not appear as such in the ledger, but are so
recorded in the annual statements to the various states in which
a (jompany transacts business.



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6 ACCOUNTS FOR INSURANCE COMPANIES § 38



BUSINESS OF A COMPANY



METHOD OF HANDLING

14. The success of a life-insurance company depends on the
amount of funds it can obtain as premiums from applicants for
insurance and the successful investment of these funds. Appli-
cations are called business, as it is on these applications that
policies are issued.

The course of the business as it goes through the various
workings of the insurance office is as follows: Contracts are
first made with agents who secure the business and the signature
of the applicants. When the application is received at the
head office, an acknowledgment is made to the agent who sent
it. For every application received, a card is made out on which
is written the name of applicant, date of application, date
received, and the name of soliciting agent. The back of the
card provides space for information concerning the medical
examination. The application is then delivered to the medical
department, where it is passed on by the department heads.
This card is kept in a file, and one can always tell by referring
to it just how far the application has gone. If the medical
department approves the application, a clerk of this department
stamps the card as approved on a certain date. The applica-
tion is then delivered to the accoimting department, where
several records must be adjusted before it is permanently filed.



ACXX)UNTING METHODS

16. The life-insurance company sells but one commodity,
protection against death or accident, in return for whidi it
receives from its patrons compensation in the form of cash
premiums. The bookkeeping is, therefore, principally con-
cerned with the recording of cash receipts and payments. The
insured is required to make his premium payments at stated
periods, but if they are overdue it is customary not to show them
in the ledger accotmts. Of course the overdue premitmi is



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§ 38 ACCOUNTS FOR INSURANCE COMPANIES 7

disclosed in the poHcy holders' ledger accounts by the absence
of any credit and the failure to pay a premium automatically
lapses the policy and cancels the insurance protection. In the
case of death, the company is liable for payment of a death
claim, but that is not entered on the books imtil payment is
made, so that nothing but cash transactions are included in the
accoimts.

The books of account used depend very largely on the
character and scope of the transactions involved, though
the ones most frequently used are the cash book, the journal,
and the ledger, which is the fimdamental book. There are,
however, nimierous subsidiary records, each of which has its
fimctions to perform in the registration of facts and all of these
are necessary in supplj-ing the data for accuracy of the ledger
accoimts.

16. The casli Journal, or casli book, is the principal
book used in recording cash receipts. It usually has a number
of subsidiaries known as the home-office cash booky the agents'
cash book, the foreign cash book, and the cash-disbursements book.
All money for. premiums paid to the home office is entered in
the home-office cash book; moneys received from agents for pre-
miums paid by policyholders to the agents instead of direct to
the company are entered in the agents* cash book. The foreign
cash book is used to record the receipt of moneys from policy-
holders residing in the districts served by the company's branch
offices. The cash-disbursements book records all the cash pay-
ments that the insurance company is required to make. The
results of the subsidiary cash books are recorded at given
periods in the general cash journal and from thence posted to
the ledger. Each cash book may be simple in form or have
ntmaerous columns, according to the fimctions that it is called
upon to perform. It is the practice of companies, however, to
arrange them in columnar form.

17. The general ledger of a life-insurance company con-
tains the various real and nominal accoimts, the form being the
same as that of any ordinary ledger. To the general ledger are
posted the footings of the various columns as well as the separate



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8 ACCOUNTS FOR INSURANCE COMPANIES § 38

entries from the cash book. From these accounts are compiled
the results and statements required at different periods, monthly,
yearly, or oftener.

Separate ledgers, known as the policyholders* ledgers, are kept
for recording the accotmts of policyh9lders. Practice has shown
that either the loose-leaf or card system is best adapted to this
particular duty; either system permits the addition or removal
of names without inconvenience.

18. A duplicate set of policyholders' ledgers is kept in the
actuarial department and contains the same information classi-
fied according to types of policies. This is necessary, in order
that the actuaries may be sure that there is ntiaintained at all
times a proper mathematical reserve against the various classes
of policies. Indeed it is the duty of the actuarial department
to protect both the insurance company and the insured by
the study of statistics and of mortality tables, and of actual
facts. This information is a protection both to the company
and to the insvired, because it enables the company to carry
the risk of the insured at the lowest possible price consistent
with safety.

19. Agency Records. — ^The business of a life-insurance
company is obtained mostly through its agents, who are com-
pensated by salaries and commissions for the services rendered.
The agents are required to make regular reports to the home
office, of policies written, premiums collected, renewals, lapses,
deaths, and all other information necessary for the company.
Various agencies are located throughout the different states at
the principal centers and these, in turn, have thei»- local sub-
agencies in places of less importance. All writing of applica-
tions, renewals, collection of premium payments are attended
to in the district agency. It is obvious, then, that credit
accounts must be kept at each agency for the various persons
insured, in order that the agency and its subagendes may keep
in touch at all times with the policyholders and make collections
at proper times in accordance with the policy contracts.

20. Liabilities. — ^Reserves, death claims, and matured,
endowments not settled must be listed as liabilities. Dividends



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§ 38 ACCOUNTS FOR INSURANCE COMPANIES 9

left with the company (the company acting as a sort of banker)
must also be shown as a liability, as the company is simply a
depository for the benefit of the assured. When interest on
policy loans is collected in advance, at the end of each year a
certain portion is yet tmeamed, hence it is a liability and must
not be overlooked. Medical fees due, taxes that have accrued,
and simdry bills that are due constitute other Uabilities. These
are followed by the capital stock and the balance or surplus.
The surplus account represents the sum of dividends that are
apportioned to the varioi^ policies, and the amount accruing
to the stockholders. In mutual life-insvirance companies, all
the surplus belongs to the policyholders and is included in the
various fund accounts.

Premiums paid in advance of due date, if any, constitute a
liability of the company. If the insured dies before his full
annual premium is paid, the company deducts the unpaid
portion from the claim; on the other hand, should a premium be
paid in advance the company would have to refimd, hence this
amount is a liability.

21. A trial balance is taken monthly. One taken as of
December 31, is as follows. The items therein are classified
under income, disbursements, assets, and liabilities. Cash-
Premium Renewals Accounts represents the income from renewal
premiums. First Year*s Premiums Account represents the
iQcome on business for the first year only. The sum of these
two is usually the basis for taxation by the various states.
The various interest accounts explain themselves. Rent
Received is income from rentals by sublease. Miscellaneous
Accoimt is a suspense account usually representing income
(renewal premiums) held awaiting proper adjustment; it is a
resting place for cash received without letters of advice.
All dividends applied to the purchase of paid-up insurance
are both an income and a disbursement; as the same amount
appears in either case, this is more a statistical accoimt
than one to show loss or gain. The Mutual Life and Trust
Account represents receipts from an old accoimt once
charged 'off.



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10 ACCOUNTS FOR INSURANCE COMPANIES §38

TRIAL BALANCE

Modern Life Insurance Company

December 31. 1914



Income


Debits


Credits


Cash premixim renewals


$


355,764.76


First year's premiums




159,176.02


Interest on notes and policy loans




11,876.35


Interest on mortgages




58,305.67


Interest on bonds




449.75


Rent received




1,741.00


Dividends applied to purchase of paid-up






insurance




99.00


Modem Life and Trust Company •




74.97


Miscellaneous accounts




100.09


Disbursements






Cash-surrender values $


20,601.55




Dividends paid policyholders


3,750.74




Death claims


30,610.00




Matured endowments


19,634.00




Supplementary contracts not involving life






contingencies, paid


1,050.00




Dividends applied to purchase of paid-up






insurance


99.00 .




Dividends applied to pay renewal premiums
Premium notes, lapsed


1,219.15




759.19




Advertising


1,377.72




Agents' commissions, first year


105,050.42




Agents' conmiissions, renewals


12,672.48




Actuary fees


2,000.04




Conmiuted renewal commissions


750.00




Dividends to stockholders


8,000.00




Department fees



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