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I <br /> IMORGAN COUNTY QUALITY WATER DISTRICT <br /> Notes to Financial Statements <br /> I <br /> INote A-Summary of significant accounting policies (continued) <br /> A.3 - Encumbrances <br /> IEncumbrance accounting is not used by the District. <br /> A.4- Cash and cash equivalents <br /> • <br /> For the purposes of the statement of cash flows, the District considers all highly liquid debt <br /> instruments with an original maturity of three months or less to be cash equivalents. <br /> IA.5 -Accounts receivable <br /> Monthly charges for water services are included with monthly utility billings. 'No allowance <br /> I for uncollectible accounts has been provided in the accompanying financial statements <br /> since substantially all accounts are deemed by management to be collectible. <br />' ' A.6- Inventory <br /> Inventory, consisting principally of supplies, is recorded at the lower of cost or market <br /> Iusing the first-in, first-out method. <br /> A.7 Capital assets <br /> I All capital assets with a unit cost greater than $5,000 are capitalized at cost (or estimated <br /> historical cost, if actual cost is not available) and updated for additions and retirements <br /> during the year. Donated capital assets are recorded at their fair value on the date <br /> l received. Improvements to assets are capitalized; the cost of normal maintenance and <br /> repairs that do not add to the value of the asset or materially extend the life of the asset are <br /> not. <br /> I Interest is capitalized on assets acquired with tax-exempt debt. The amount of interest to <br /> be capitalized is calculated by offsetting interest expense incurred from the date of <br /> borrowing until project completion with interest earned on invested proceeds over the same <br /> Iperiod. No interest was capitalized during the year. <br /> All reported assets are depreciated with the exception of land costs.' Improvements are <br /> I depreciated over the remaining useful lives of the related capital assets. Depreciation is <br /> computed using the straight-line method over the following useful lives: <br /> Water system 10-90 years <br /> I Buildings and improvements 10-30 years <br /> Machinery and equipment 3-15 years <br /> I <br /> -15- <br />