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do f <br /> r L L. H. TANNER CONSTRUCTION CORPORATION <br /> NOTES TO FINANCIAL STATEMENTS <br /> r, L For the five month period ended May 31 , 2006 <br /> NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br /> Nature of Business <br /> The Company was incorporated in the State of Florida on October 20, 1997 and is located in <br /> Melbourne, Florida. The Company is wholly-owned by Lawrence H . Tanner, Jr. <br /> The Company is in business of development, planning, design and building of commercial, <br /> industrial and heavy civil construction, including complete interior buildouts, restorations and site <br /> development. The contracts are primarily fixed price contracts. <br /> Cash and cash equivalents <br /> Cash and cash equivalents include cash on hand, cash in banks, and all highly liquid investments with a <br /> maturity of three months or less at the time of purchase . <br /> Revenue Recognition <br /> r Revenues from fixed-price construction contracts are recognized on the percentage-of-completion <br /> method, measured by the percentage of costs incurred to date to estimated total costs for each contract. <br /> _ This method is used because management considers expended costs to be the best available measure of <br /> progress on these contracts . Because of the inherent uncertainties in estimating costs, it is at least <br /> reasonably possible that the estimates used will change within the near term . <br /> Cost Recognition <br /> Contract costs include all direct material, labor, and equipment costs and those indirect costs related to <br /> contract performance such as indirect labor, supplies, and tool costs. Provisions for estimated losses on <br /> _ uncompleted contracts are made in the period in which such losses are determined. Changes in job <br /> performance, job conditions, and estimated profitability, including those arising from contract penalty <br /> provisions, and final contract settlements may result in revisions to costs and income and are recognized in <br /> r the period in which the revenues are determined. <br /> The assets "Costs and estimated earnings in excess of billings on uncompleted contracts ", represent <br /> r revenues recognized , in' excess of amounts billed. The liability "Billings in excess of <br /> costs and estimated <br /> earnings on uncompleted contracts ", represents billings in excess of revenues recognized . Contract <br /> retentions are included in contracts receivable. <br /> r <br /> r <br /> r <br />