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West Construction, Inc. and Subsidiaries <br />Notes to Consolidated Financial Statements <br />As of and for the years ended December 31, 2014 and 2013 <br />1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): <br />Contract Receivables <br />Contract receivables are recorded when invoices are issued and are presented in the consolidated <br />balance sheet net of the allowance for doubtful accounts. The Company provides an allowance <br />for doubtful collections based upon a review of outstanding receivables, historical collection <br />information, and existing economic conditions. Normal contract receivables.are due 30 days <br />after the issuance of the invoice. Contract retentions are due 30 days after completion of the <br />project and acceptance by the owner. Receivables past due more than 120 days are considered <br />delinquent. Delinquent receivables are written off based on individual credit evaluation and <br />specific circumstances of the customer. <br />Currently, no provision for doubtful accounts has been made as management considers all <br />amounts fully collectible. The Company's receivables are collateralized by normal contractor <br />lien rights. At December 31, 2014 and 2013, no contractor lien rights have been exercised by the <br />Company. <br />Inventory <br />Inventory is valued at cost, determined by the first -in, first out (FIFO) method, and consists <br />primarily of materials not yet placed in service. <br />Property and Equipment <br />Property and equipment is stated at cost. Depreciation is calculated using the straight-line <br />method over the following estimated useful lives of the assets. <br />Computer equipment 3 — 10 years <br />Office furniture and equipment 5 — 10 years <br />Vehicles 3 — 5 years <br />Construction equipment 3 — 10 years <br />Income Taxes <br />The Company has made an election to be treated as a Small Business Corporation under <br />Subchapter S of the Internal Revenue Code, whereby profits and losses are passed directly to the <br />stockholders for inclusion in their personal tax returns. The Subsidiaries are single member <br />LLC's and are, therefore, disregarded entities for U.S. federal income tax purposes under the <br />Internal Revenue Code. Accordingly, these consolidated financial statements reflect no <br />provision for U.S. federal income taxes. <br />- IOof18- <br />