Montana labor news., 1944-05-11

even amount of $4,000, 900 which was
sufficient to balance the par value and
principal amount of securities issued.
In this transaction, Butte Electric &
Power Co. entered the plant at 81, 1871 ,347
on its books greater than appeared on
the books Of the predecessor, and for
the reasons I have heretofore given-no
additional investment, no increased cost
the amount in my opinion represents
a write-up properly classifiable in ac-
count 107.
In all three Of these transactions there
were security exchanges. In all three
the plant accounts were recorded in
amounts sufficient to balance the par
and principal amount of securities.
We accountants are rather q queer
lot. We insist on having everything in
exact balance, so when on the right
hand side we show par value and prin-
cipal amount Of securities, on the left
hand side we have to show exactly the
same figure to the penny. In all Of
these cases the plant account was a
balancing figure, and the total write-up
of 50, sos, 1855 continued in Butte's books
of accounts, and went through the mer-
ger and consolidation in 1912 into the
books Of The Montana Power Co.
@. Did the consolidation and merger
of 1912-or I had better say the con
~solidation or merger of 1912-result in
the creation Of an adjustment item?
A. In my opinion, it did.
@. Is that the item OF amount Of $19,-
669, 891.11 shown on Exhibit 262?
A. That is correct.
@. Will you explain your position with
respect to chat amount?
A. Butte Electric & Power Co, which
as have said was organized in 1901, in
1912 owned the stock Of Missouri River
Electric & Power Co, the Madison River
Power Co., and through the latter, the
stock of Billings & Eastern Montana
Power Co.
On December IL, 1912, by an agree
ment of consolidation, these companies
were merged into and formed the Mon
tana Power Co., a newly-formed corpora
ton. The new company, the Montana
Power Co.. issued four shares Of its
common stock for each share Of the
common stock of the old company.
By this process the capital structure
Of Montana was greatly increased over
that of Butte on a consolidated basis.
The plant account Of Butte N a con-
solidated basis was $2l, 100000 and that
was increased to SAL 600, 900 on the books
of Montana.
This increase of $4,000, 900, in my
opinion, was a write-up. I would like
to add here that the $19,8O0,0O0 be-
comes $19,663 ,391.11 as shown on Exhibit
262 because of post-merger adjustments
which Mr.. O'Neil has pointed out, and
I will not bother to testify with regard
to those items.
once more we had an exchange of Sc
c~urities, and once more we had a bal
ancing of the plant account with the
par value and principal amount Of Sc
curities issued.
Likewise, there was no additional in
yestment in the plant of the companies.
There was no additional costs, and the
amount represents a write-up, in my
opinion.
Even as far back as 1912 direct write
ups were frowned upon, and for many
reasons. OF course, a direct write-up
does not result in an increase of cost.
In my opinion, an indirect write-up can
not do so. In the transaction of De-
cember ~, 1912, tina transaction was
not the result of arms length bargain
ing, in my opinion, and the amount I
have discussed represents a wite-up
properly classifiable in account 107.
@. Is the write-up you have just de-
scribed in the amount of $19,663 ,391.l1
in addition to the write-up of $685.
900 existing on Butte Electric & Power
Continued on Page Four