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<br />SOUTHEASTERN ENGINEERING CONTRACTORS, INC. <br />NOTES TO THE FINANCIAL STATEMENTS <br /> <br />NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br /> <br />General <br />The Company was incorporated under the laws of the State of Florida and began operations <br />in June, 1984. The Company was created for the purpose of performing general construction <br />contracts. The work is normally performed under fixed-price contracts. All projects are <br />located in the South Florida area. <br /> <br />Use of estimates <br />The preparation of financial statements in conformity with generally accepted accounting <br />principles requires management to make estimates and assumptions that affect the reported <br />amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date <br />of the financial statements and the reported amounts of revenues and expenses during the <br />reporting period. Actual results could differ from those estimates. <br /> <br />Revenue recognition <br />Contract revenue is recognized using the percentage-of-completion method. Under this <br />method, the percentage of contract revenue to be recognized currently is computed as that <br />percentage of estimated total revenue that incurred costs to date bear to total estimated costs, <br />after giving effect to the most recent estimates of cost to complete. It is reasonably possible <br />that changes in estimates may occur in the near term. Revisions in cost and revenue <br />estimates are reflected in the period in which the facts which require the revision become <br />known. When the revised cost estimates indicate a loss on an individual contract, the total <br />estimated loss is provided for currently in it:> entirety without regard to the percentage of . <br />completion. <br /> <br />Contract costs include all direct material, labor, subcontractor costs and those indirect costs <br />related to contract performance, such as indirect labor, supplies, equipment rental, and <br />repairs. Selling, general, and administrative expenses are charged to operations as incurred. <br /> <br />The asset "cost and estimated earnings in excess of billings on uncompleted contracts", <br />represents revenues recognized in excess of amounts billed. The liability, "billings in <br />excess of costs and estimated earnings on uncompleted contracts", represents billings in <br />excess of revenues recognized. <br /> <br />Depreciation <br />Depreciation is provided for on the straight-line method over the eSTimated useful lives of <br />the assets. <br /> <br />Cash and cash equivalents <br />For the purpose of reporting cash flows, the Company has defined cash equivalents as those <br />highly liquid investments purchased with an original maturity of three months or less. <br /> <br />6 <br />