2018-038A - Laserfiche WebLink

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Johnson -Davis, Incorporated (the "Company") is involved in the construction industry, principally the installation and repair of underground water, sewer and drainage lines. Note 2 - Summary of Significant Accounting Policies Recognition of income: Revenue from construction contracts is recognized on the percentage -of - completion method, measured by the proportion of construction costs incurred to date to estimated total construction costs for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. Construction costs of projects under contract include all direct material and labor costs and those indirect costs related to contract performance. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on the uncompleted contracts are made in the period in which such losses are determined. Changes in estimated profitability are recognized in the period in which the revisions are determined. The costs of construction contracts are charged to earnings on the percentage -of -completion method used to recognize revenues. All other services are accounted for using the accrual method of accounting. Contract receivables and allowance for doubtful accounts: Contract receivables are composed of amounts due from interim and final billings on long-term construction contracts as well as current billings from other services provided and are reported at the amount management expects to collect from outstanding balances. Management provides for an allowance for uncollectible amounts based on the Company's historical bad debt experience and management's judgment. As of the year ended June 30, 2017, management feels the allowance for doubtful accounts is reasonably stated. Cash: The Company maintains cash balances at a financial institution which occasionally may exceed federally insured' amounts. At June 30, 2017, the uninsured cash balances totaled $ 5,791,094. Provision for depreciation: Depreciation does include the amortization of the assets collateralizing the capital lease obligations (See Note 8). Depreciation is provided for using the straight-line method over the estimated useful lives for each asset category as follows: Machinery and equipment 5-10 years Automotive equipment 3-7 years Furniture and fixtures 5 years Buildings and improvements 5-39 years Minor additions and repair and maintenance items not extending the original useful life of the assets are expensed as incurred. Additions and major renewals are capitalized. Use of estimates: The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make r estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported j amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7