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I j <br /> CHI-ADA CORPORATION <br /> NOTES TO FINANCIAL STATEMENTS <br /> FOR THE YEAR ENDED DECEMBER 31, 2014 <br /> Contract Receivables <br /> Contract receivables are recorded when invoices are issued and are presented in the balance sheet <br /> net of the allowance for doubtful accounts. Contract receivables are written off when they are <br /> determined to be uncollectible. The allowance for doubtful accounts is estimated based on the <br /> Company's historical losses, the existing economic conditions in the construction industry, and the <br /> financial stability of its customers. There were no allowances for doubtful accounts in 2014. <br /> Depreciation <br /> Depreciation is provided principally on the straight-line method over the estimated useful lives of <br /> the assets, which are generally from three to five years. <br /> Fair Values of Financial Instruments <br /> The following methods and assumptions were used by Chi-Ada Corporation in estimating its fair <br /> value disclosures for financial instruments: cash and cash equivalents, accounts receivable, <br /> security and bid bond deposit, accounts payable, accrued expenses, payroll and taxes payable and <br /> current portion of long-term debt. The carrying amounts reported in the statement of financial <br /> position approximated fair values because of the short maturities of these instruments. <br /> Property and Equipment <br /> Purchased equipment is recorded at cost and donated equipment is recorded at fair value at the date <br /> of donation and depreciated using the straight-line method, over the estimated useful lives of the <br /> assets. <br /> Income Taxes <br /> The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue <br /> Code effective January I, 1977. Therefore, the Company does not pay federal or state corporate <br /> income taxes on its taxable income. Instead, the sole stockholder is liable for individual federal <br /> and state income taxes on his respective share of the Company's taxable income. Accordingly, no <br /> provision for income taxes is included in the accompanying financial statements. <br /> Estimates <br /> The preparation of financial statements in conformity with accounting principles generally <br /> accepted in the United States of America requires management to make estimates and assumptions <br /> that affect certain reported amounts and disclosures. Accordingly, actual results could differ from <br /> those estimates. <br /> 8 <br />