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chmidt Construction <br />Notes to Divisional Balance Sheet <br />December 31, 2003 <br />Note 1 -Nature of Business and SlgnHieant Accounting Policies <br />(Continued) <br />Income Taxes -Pursuant to provisions of the Internal Revenue Code, the Parem <br />has etetted to be treated as an S Corporation. Generally, the income of an <br />S Corporation is not subject to federal income tax at the corporate level, but rather <br />the stockholders are required to include a pro rata share of the corporation's <br />taxable income or loss in their personal income tax returns, ircespettive of whether <br />dividends have been paid. Accordingly, no provision for federal income taxes has <br />been made in the accompanying divisional balance sheet. <br />Revenue Recognition -Revenue from sales of asphak products is recognized when <br />the product is shipped to the customer. Revenue on long-term contracts is <br />recognized under the percentage-of-completion method of accounting and is <br />measured principally on a unk-of-delivery basis. Full provision is made for any <br />anticipazed losses. Billings for long-term construction contracts are rendered <br />monthly, including the amount of retainage wkhheld by the customer until contratt <br />completion. As a general contractor, the Division withholds similar retainages from <br />each subcontrattor. Accounts receivable includes approximately $622,000 of <br />unbilled receivables. <br />Use of Estimates -The preparation of a balance sheet in conformity with <br />accounting principles generally accepted in the Unked States of America requires <br />management to make estimates and assumptions that affect the reported amourrcs of <br />assets and liabilkies and disclosure of contingent assets and liabilkies ar the date of <br />the balance sheet. Actual results could differ from those estimates. <br />Note 2 -Related Party 7'ransaetions <br />Generally, amounts due from Edw. C. Levy Co. and affiliates -net are the resuk of <br />transactions in the normal course of business, as well as financing the working capital <br />needs of affiliates. These balances have been classified as long-term based on the <br />interrcion of the parties as to repayment. <br />4 "~rdr] <br />