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<br />! .. <br /> <br />. <br /> <br />CONQlJEST ENGINEERING GROUP COMPANY <br />NOTES TO THE FINANCIAL STATEMENTS <br /> <br />NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED <br /> <br />Income Taxes <br />The Company uses the percentage-of-completion method of reporting income from long- <br />term construction contracts for fwancial statements purposes and the completed contract <br />method for income tax purposes, <br /> <br />The Company has elected, with the consent of its stockholders, to be taxed as an <br />S corporation under the provisions of Section 1362 of the Internal Revenue Code and <br />state laws, Under these provisions, the Company does not pay federal or state income <br />taxes on its taxable income. Instead the stockholders are liable for individual income <br />taxes on their respective share of the Company's income, <br /> <br />,. As-oTDeceffibe-r3T;'WCY7;-no wcome- Wl1rpassWoliglYlOLne Stoclcl1l51a:ers, A---ccortltITgty;' <br />no distributions are expected for the purpose of satisfying the tax due from the S <br />Corporation income, <br /> <br />~ <br /> <br />Althollgh not accrued in the accompanying financial statements, the gross long term <br />deferred federal income that could pass through to the stockholders at December 31, 2007 <br />is as follows: <br /> <br />s <br /> <br />Deferred <br /> <br />Difference in revenue recognition related to the <br />conversion of percentage of completion to <br />completed contract basis of acc01mting. <br /> <br />$ 2,822,232 <br /> <br />NOTE 2 - CONTRACTS RECEIVABLE <br /> <br />Contracts receivable are as follows: 2007 2006 <br />Billed <br />Completed contracts <br />Due $ 324,388 $ 413,958 <br />Contracts in progress <br />Due 1,260,637 1,475,237 <br />Retainage 1,301,758 847,123 <br /> $ 2,886,783 $ 2,736,318 <br /> <br />7 <br /> <br />.. <br />