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I I I I I I II II II 'I I 'I !I 'I !I I II II I Consul-Tech Enterprises, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31,2006 and 2005 A. Summary of Significant Accounting Policies (continued) Revenue and Cost Recognition (continued) Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to, costs and income and are recognized in the period in which the revisions are determined. The asset "costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability "billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers as cash equivalents all time deposits and highly liquid investments with a maturity of three months or less, when purchased. The Company maintains its cash balances in a [mancial institution, which. is insured for up to $100,000 per company/entity, by the U.S. Federal Deposit Insurance Corporation, As of December 31, 2006 and 2005 the uninsured cash balances totaled approximately $2,373,950 and $1,750,000, respectively, The Company believes it is not exposed to any significant credit risk on cash and cash equivalents because the bank is a large national enterprise, and is financially sound. Contracts Receivable Contracts receivable are recorded when invoices are issued. The Company provides for an allowance for doubtful accounts which is based upon a review of outstanding receivables, the [mancial stability of their clients and the existing economic condition, Delinquent receivables are written-off based on individual credit evaluation and specific circumstances of the customer. . Property and equipment Property and equipment are carried at cost. Depreciation and amortization of property and equipment for [mancial reporting purposes is provided primarily using the straight-line method over the following estimated useful lives: Years Building and leasehold improvements Furniture and fixtures Computer equipment Field equipment Transportation equipment 10 - 15 5-7 3-5 5 - 10 4-5 7