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,NOTES -20 FINANCIAL STATEMENTS --Continued FELLSMERE JOINT VENTURE (A PARTNERSHIP) NOTE A --SIGNIFICANT ACCOUNTING POLICIES --Continued Sun Ag, Inc. (formerly Fellsmere Management Company) manages the operations and assets of the Joint Venture. The Joint Venture operates a citrus packinghouse and primarily processes fruit produced by the Joint Venture. Accounting Basis for Recording Revenues, Expenses and Inventories: Citrus and Farming --the Joint Venture records revenue as fruit and crops are harvested and sold. Because the proceeds for fruit usually are not completely received until the following year and prices are not fixed until near the date of final payment, management estimates the amount to be received for the fruit. The excess, if any, of the expected net revenues over the advances received is recorded as accounts receivable. Adjustments to the estimated revenues, if any, are recorded in the following year when actual amounts become known. As of September 30, 1988 and 1987, respectively, approximately $2,238,750 and $957,000 has been included in accounts receivable as management's estimate of the final settlement to be received on the fruit sold for the 1988 and 1987 seasons, respectively. During fiscal 1988 the receivable at September 30, 1987 and an additional $871,224 for the 1987 season was collected in full. The Joint Venture leases farm land and a vegetable packinghouse to agricultural companies. Revenue from the leases totaled approximately $135,000 and $179,000 for the years ended September 30, 1988 and 1987, respectively, and is recorded as farming revenue as it is earned. Expenses generally are recognized when incurred except in the case of certain citrus grove care and farming costs associated with the next season's crop. These costs are deferred and included separately in the balance sheet as deferred citrus costs and deferred farming costs, and are recognized as expenses when the related crops are harvested. In addition, certain grove care costs related to groves under development are capitalized until the trees reach their productive stage. Inventories are valued at the lower of cost or market. Cost is determined generally on the first -in, first -out method. Cattle inventory at September 30, 1987 is stated at current market value, which is approximately $69,000 less than cost. There is no cattle inventory at September 30, 1988. Cattle Operations --Revenues from sales of breeding herd and calf inventory are recorded at the time contractual ownership is transferred to the buyer. -8-