The analysis of costs for use in equipment replacement decisions is not a new topic, for much has been said and written on the subject. However, one who reads this literature finds advocated a confusing diversity of formulas and methods for computing and comparing costs. The objective of this article is therefore to examine these differences and to develop an approach to the problem which will be logically sound and also workable in the solution of practical business problems. It will be limited to methods of determining and comparing costs for use in deciding whether or not to replace an existing piece or type of equipment with a new or different machine capable of performing the same function. The first step in developing a method for analysis of costs to be used in decisions as to replacement of equipment must be a clear statement of the principle underlying the comparison of alternatives in the selection of equipment. From this it is possible to determine what facts are needed and with this in mind one can proceed to collect the data. A cost comparison can then be made with assurance that the results will be reliable within the limits of the precision with which the cost figures have been measured. It will also be found that this approach can simplify a problem the solution to which has often been made complex and confusing.

The question of the accountant's responsibility was discussed in an article titled "What is the Accountant's Proper Responsibility?," which was published in the November 1946 issue of "Journal of Accountancy." In that article attention was directed to the fact that up to the present an accountant may dodge the responsibility of stating that his examination lacked some of the standard auditing procedures carefully developed over the past fifty years. He may state that he did this and that in the way of verification and omitted something else, but, how is the layman to know whether what he did constitutes an audit on which reliance may be placed. The expression of an opinion by an accountant in connection with financial statements means that it is a financial picture upon which management and third parties may rely. Punishment may be inflicted if he gives this opinion without an adequate examination. But the accountant who makes a superficial examination and who wishes to dodge responsibility for it may hide in a fog of words.

Reviews the book "Business Law—Principles and Cases," 3rd ed., by Harold F. Lusk.

The substantial fall in interest rates which began in the early 1930s resulted in a widespread exercise by corporations of the option to call bonds before maturity, where such provision had been incorporated in the bond terms. Even though a call premium had to be paid, the resulting saving in interest cost often was sufficient to make bond refunding appear mandatory. Other reasons which might have tipped the scales in situations where the interest saving may not have been significant, were the substantial saving in taxes based on income in a high tax year if a relatively large amount of unamortized bond discount and expense, applicable to the refunded bond, was present, and secondly, the opportunity to issue refunding bonds which omitted restrictive covenants found in the old bonds. The true nature of unamortized bond discount or bond premium and the correct presentation of the bond liability can be inferred from the ordinary compound interest computations used to arrive at the present worth of bonds.

Reviews the book "Accounting Fundamentals," 2nd ed., by George A. MacFarland and Robert D. Ayars.