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® T.F.R. ENTERPRISES, INC AND SUBSIDIARIES <br /> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br /> NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <br /> Operations and Accounting <br /> T.F.R. Enterprises. Inc.and subsidiaries("the Compam") is in the principal business of expedient disaster • <br /> debris management, removal, reduction, recycling, and disposal services throughout the United States. <br /> Customers include federal agencies, municipalities,and private companies. <br /> Basis of Consolidation <br /> The consolidated financial statements include all accounts of T.F.R. Enterprises. Inc. (Enterprises)and its <br /> 99% majority owned subsidiaries T.F.R. Equipment; LP ('`Equipment") and T.F.R. Realty, LP("Realty). <br /> The remaining 1%is owned by T&J Management, LLC, which is wholly owned by a trust established for <br /> the benefit of a related party. <br /> Equipment is an operating entity formed to own heavy equipment which is primarily leased to the Company <br /> for use in the performance of its service contracts. Realty is an operating entity formed to own real estate. <br /> All of its income is derived from the Company. <br /> All significant intercompany accounts and transactions have been eliminated in the consolidation. <br /> Cash and Cash Equivalents <br /> For purposes of the statements of cash flows. the Company considers cash and short-term investments with <br /> original maturities of ninety days or less to be cash and cash equivalents. <br /> Accounts Receivable <br /> Accounts receivable are recognized On the basis of amounts billed, less pavmentlreceived. The Company <br /> provides for uncollectable accounts receivable through the allowance method of accounting. Under this <br /> method, a provision for uncollectable accounts is charged to expense and the allowance account increased <br /> based on past collection history and management's evaluation of accounts receivable. All amounts • <br /> considered uncollectable are charged against the allowance account and recoveries of previously charged <br /> off accounts are added to the account.Receivables are considered past due based on how recently payments <br /> have been received. <br /> Management has reserved against the receivables discussed in Note I for the amount of$713,177. Bad debt <br /> expense was SSS7.664 and SO for the year ending December 31, 2017 and 2016. <br /> Property and Equipment <br /> Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the <br /> straight-line method for financial reporting. Maintenance and repairs are charged to expense as incurred. <br /> Major renewals and betterments are capitalized and depreciated over their estimated useful life. When <br /> property and equipment is sold or retired, the related cost and accumulated depreciation are removed from <br /> the accounts and any gain or loss is included in income. <br /> 9 <br />