SAMPLE CONSTRUCTION COMPANY. FINANCIAL STATEMENT AND SUPPLENTARY INFORMANTION For the Year Ended December 31, 2011

Transcription

1 FINANCIAL STATEMENT AND SUPPLENTARY INFORMANTION For the Year Ended December 31, 2011

2 The financial statement, prepared by an independent Certified Public Accountant, is essential for bonding purposes. It should answer all of the surety s questions regarding the financial health of the company, as well as disclose contingencies, guarantees, and other items that may not be reflected on the various statements. If the surety knows the CPA understands the construction industry, the financial statement will enhance the contractor s bonding line due to the increased reliability of the information presented. The following is a financial statement prepared to maximize both bonding and banking lines.

3 TABLE OF CONTENTS PAGES Independent Accountant's Review Report on the Financial Statements (The Representation of Management)...1 Financial Statements Balance Sheet...2 Statement of Operations and Retained Earnings...3 Statement of Cash Flows Notes to the Financial Statements Supplementary Data Schedule 1-Summary of Construction Operations...17 Schedule 2-Schedule of Completed Contracts...18 Schedule 3-Schedule of Contracts in Process...19 Schedule 4-Schedule of Revenues Earned...20 Schedule 5-General and Administrative Expenses...21

4 INDEPENDENT ACCOUNTANT S REVIEW REPORT The Shareholder and Board of Directors of Sample Construction Company Phoenix, Arizona I have reviewed the accompanying balance sheet of Sample Construction Company as of December 31, 2011 and the related statements of operations and retained earnings and cash flows for the year then ended. A review includes primarily applying analytical procedures to management s financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, I do not express such an opinion. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. My responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require me to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. I believe that the results of my procedures provide a reasonable basis for my report. Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles generally accepted in the United States of America. My review was made for the purpose of expressing a conclusion that there are no material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. The information included in the accompanying Schedules 1 through 5 is presented only for purposes of additional analysis and has been subjected to the inquiry and analytical procedures applied in the review of the basic financial statements, and I am not aware of any material modifications that should be made to such data. THESE FINANCIAL STATEMENTS HAVE BEEN PREPARED ONLY FOR EDUCATIONAL PURPOSES!!! March 10,

5 BALANCE SHEET December 31, 2011 ASSETS Current assets (Note 1) Cash and cash equivalents (Notes 1 and 2) $ 385,000 Contracts receivable (Notes 1, 2 and 3) 1,540,000 Costs and estimated earnings in excess of billings on uncompleted contracts (Notes 1 and 4) 15,000 Salary advances due from employees 4,000 Note receivable, shareholder (Note 7) 5,000 Prepaid items 31,000 Total current assets $ 1,980,000 Property and equipment, net of accumulated depreciation and amortization (Notes 1 and 5) $ 250,000 Other assets Note receivable, shareholder (Note 7) $ 57,000 Total assets $ 2,287,000 The Notes to the Financial Statements are an integral part of this Statement.

6 LIABILITIES Current liabilities (Note 1) Accounts payable, including retention of $45,000 $ 450,000 Billings in excess of costs and estimated earnings on uncompleted contracts (Notes 1 and 4) 150,000 Current portion of long-term debt (Note 9) 75,000 Accrued liabilities Insurance payable 40,000 Bonuses and payroll taxes payable 90,000 Sales tax payable 35,000 Deferred income taxes payable (Notes 1 and 8) 87,000 Total current liabilities $ 927,000 Long-term debt (Note 9) Note payable $ 300,000 Less current portion above -75,000 Total long-term debt $ 225,000 Deferred income taxes (Notes 1 and 8) $ 25,000 Total liabilities $ 1,177,000 Commitments (Note 6) $ - STOCKHOLDER S EQUITY Capital stock Authorized 1,000,000 shares of common stock, no par value, 9,804 shares issued, 4,804 shares outstanding $ 50,000 Additional paid-in capital 110,000 Retained earnings 950,000 Total stockholder s equity $ 1,110,000 Total liabilities and stockholder's equity $ 2,287,000-2-

7 STATEMENT OF OPERATIONS AND RETAINED EARNINGS (See Independent Accountant s Review Report) Contract revenues earned (Note 1) $ 11,000,000 Cost of revenues earned (Note 1) -9,300,000 Gross profit $ 1,700,000 General and administrative expenses (Note 1) -1,099,000 Income (-loss) from operations $ 601,000 Other income (-expense) Interest income $ 20,000 Miscellaneous income 2,000 Interest expense -15,000 Total other income (-expense) $ 7,000 Net income (-loss) before (-provision) recovery Income before income taxes $ 608,000 Provision for income taxes (Notes 1 and 8) -240,000 Net income (-loss) $ 368,000 Retained earnings, beginning of year 582,000 Retained earnings, end of year $ 950,000 The Notes to the Financial Statements are an integral part of this statement. -3-

8 STATEMENT OF CASH FLOWS Cash flows provided by operating activities Cash received from customers $ 10,300,000 Cash paid to suppliers and employees -10,068,000 Interest received 20,000 Miscellaneous income 2,000 Interest paid -15,000 Net cash provided by operating activities $ 239,000 Cash flows used by investing activities Capital expenditures $ -93,000 Net cash used by investing activities -93,000 Cash flows used by financing activities Principal payments on long-term debt $ -80,000 Proceeds from note receivable 4,000 Net cash used by financing activities -76,000 Net increase in cash and cash equivalents $ 70,000 Cash and cash equivalents, beginning of period 315,000 Cash and cash equivalents, end of period $ 385,000 The Notes to the Financial Statements are an integral part of this statement. -4-

9 STATEMENT OF CASH FLOWS (CONTINUED) Reconciliation of Net Income to Net Cash Provided by operating activities Net income (-loss) $ 368,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation $ 65,000 Change in assets and liabilities Increase in contracts receivable -90,000 Decrease in costs and estimated earnings in excess of billings on uncompleted contracts 20,000 Increase in prepaid items -13,000 Increase in employee advances -1,000 Decrease in accounts payable -235,000 Increase in billings in excess of costs and estimated earnings on on uncompleted contracts 70,000 Decrease in bonuses and payroll taxes payable -15,000 Increase in sales tax payable 11,000 Decrease in insurance payable -3,000 Increase in deferred income taxes payable 62,000 Total adjustments -129,000 Net cash provided by operating activities $ 239,000 The Notes to the Financial Statements are an integral part of this statement. -5-

10 NOTES TO THE FINANCIAL STATEMENTS Company formation and operating cycle. Sample Construction Company is a corporation duly organized and operating under the laws of the State of Arizona. The Corporation was approved by the State of Arizona on March 6, The length of the Company's contracts vary but is typically less than one year. Therefore, assets and liabilities are classified as current and non-current based on a one year operating cycle. 1. SIGNIFICANT ACCOUNTING POLICIES Revenue and cost recognition. The accompanying financial statements are prepared according to the percentage of completion method, and therefore take into account the profit earned to date on contracts not yet completed. The amount considered as earned under this method is that portion of the total contract price the contractor has a right to bill, based on that portion of the contract work actually completed. It is not related to the progress billings to customers. Completion percentage is measured by the relationship of cost expended to anticipated final total cost, based on current estimates of cost to complete the project. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect insurance, miscellaneous expenses and depreciation costs. 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. Arizona, its counties and most of its cities impose a sales tax on the Company s sales when Sample Construction Company is acting in the capacity of a prime contractor. The Company collects the sales tax from its customers and remits the taxes to the applicable taxing authority. The Company s accounting policy is to include the sales tax collected and remitted in both revenue and cost of revenues earned. For the year December 31, 2011, the sales tax collected and reflected in cost of revenues earned is $390,

11 NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contract receivables. Contracts receivable represent the amounts billed but uncollected on completed construction contracts and construction contracts in process. The Company uses the allowance method of recognizing uncollectible accounts receivable. The allowance method recognizes bad debt expense as a percentage of accounts receivable based on a review of the individual accounts outstanding and the Company's prior history of uncollectible accounts receivable. There was no change in the allowance from the prior year. At December 31, 2011, there is no allowance for bad debt established and in the opinion of management, all outstanding receivables at December 31, 2011 are considered fully collectible. There not any change in the valuation allowance from the prior year. Property, equipment, and depreciation. Property and equipment are recorded at cost. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized when incurred. Depreciation for all major classes of depreciable assets is provided for primarily on the straight-line method, taken over the useful lives of the assets. Income taxes. The Company is taxed for federal and state purposes under the provisions of Subchapter C of the Internal Revenue Code. For financial accounting purposes the Company reports income and expenses based on the percentage-of-completion method of accounting for long-term construction contracts. For tax accounting purposes the Company reports income and expenses based on the completed contract method of accounting for long-term construction contracts. The Company recognizes deferred income taxes according to the provisions of FASB Accounting Standards Codification and FASB ASC 740 utilizes the liability method and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. The Company accounts for tax penalties and interest in the provision for income taxes. The Corporation adheres to accounting rules that prescribe when to recognize and how to measure the financial statement effects, if any, of income tax positions taken or expected to be taken on its income tax returns, including the position that the Corporation continues to qualify to be treated as a C Corporation for both federal and state -7-

12 NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) income tax purposes. These rules require management to evaluate the likelihood that, upon examination by relevant taxing jurisdictions, those income tax positions would be sustained. Based on that evaluation, if it were more than 50% probable that a material amount of income tax would be imposed at the entity level upon examination by the relevant taxing authorities, a liability would be recognized in the accompanying balance sheet along with any interest and penalties that would result from that assessment. Should any such penalties and interest be incurred, the Corporation s policy would be to recognize them as operating expense. Based on the results of management s evaluation, adoption of the new rules did not have a material effect on the Corporation s financial statements. Further, no interest or penalties have been accrued or charged to expense as of December 31, 2011 or for the year then ended. The Corporation s income tax returns are subject to examination by taxing authorities for a period of three years from the date they are filed. As of December 31, 2011, the tax following tax years are subject to examination: Jurisdiction Open Years for Filed Returns Return to be filed in 2012 Federal December 31, December 31, 2011 Arizona December 31, December 31, 2011 General and administrative expenses. General and administrative expenses are charged to expense as incurred. Cash equivalents. For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Compensated absences. Compensated absences have not been accrued because the amount cannot be reasonably estimated. Advertising costs. Advertising costs are charged to expense when incurred. For the year ended December 31, 2011, there is not any advertising expense. 2. CONCENTRATION OF CREDIT RISK Company activities Sample Construction Company is engaged in the construction industry as a -8-

13 NOTES TO THE FINANCIAL STATEMENTS 2. CONCENTRATION OF CREDIT RISK (CONTINUED) general contractor, primarily on commercial projects in the greater Phoenix, Arizona area. The work is performed under fixed-price contracts. These contracts are undertaken by the Company without joint ventures or partnerships. Cash and Cash Equivalents The Company maintains noninterest bearing cash balances in two financial institutions with various locations. The Federal Deposit Insurance Corporation provides for unlimited insurance coverage of noninterestbearing accounts through December 31, The noninterest bearing accounts are separate from, and in addition to the insurance coverage provided to a depositor's other deposit accounts. The Company has other deposit accounts at a financial institution with two different locations. The Federal Deposit Insurance Corporation insures $250,000 of deposits at each location. At December 31, 2011, the Company has uninsured cash in the aforesaid money markets accounts in the approximate amount of $15,000. Effective July 31, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act permanently raises the current standard maximum deposit insurance amount to $250,000. Major customers During the year ended December 31, 2011, Sample Construction Company recognized sales to three major customers that exceeded 10% of total net sales. Sales to these customers were $3,750,000 (34.1%), $3,400,000 (30.9%) $2,900,000 (26.4%) of total net sales. Contract receivables It is the Company's policy to pre-lien all construction work performed. Pre-liens enable a contractor to file a lien in the event the project owner fails to live up to the provisions of the contract. In general, a construction contractor has a number of days, defined by statue, in which to file a lien in the event of non-payment of a contract receivable. The contractor then has six months to foreclose on the property. The foreclosure forces a sheriff's sale of the aforesaid property. The bank or mortgage holder has first rights, up to the mortgage amount, to any proceeds of the sale. Any proceeds in excess of the mortgage is received by the contractor. -9-

14 NOTES TO THE FINANCIAL STATEMENTS 3. CONTRACT RECEIVABLES Contract receivables Completed contracts $ 270,000 Contracts in process 1,000,000 Unbilled receivables 20,000 Retention 250,000 Less allowance for doubtful accounts (Note 1) - Total contract receivable $ 1,540,000 Unbilled receivables represent completed jobs for which a final billing had not been submitted as of December 31, Historically, the Company's uncollectible contracts receivable, after direct write-offs, have been negligible. In the opinion of management, all contract receivables outstanding at December 31, 2011, are considered to be fully collectible, therefore at December 31, 2011, no doubtful account is established. Bad debt expense at December 31, 2011 is $20,000. As of December 31, 2011, there is not any contract receivables aged greater than 90 days. 4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs incurred on uncompleted contracts $ 3,650,000 Estimated earnings 650,000 $ 4,300,000 Less: Billings to date -4,435,000 Included in accompanying balance sheet under the following captions: $ -135,000 Costs and estimated earnings in excess of billings on uncompleted contracts $ 15,000 Billings in excess of costs and estimated earnings on uncompleted contracts -150,000 $ -135,

15 NOTES TO THE FINANCIAL STATEMENTS 5. PROPERTY AND EQUIPMENT Assets Building and land $ 150,000 Furniture and fixtures 50,000 Vehicles 350,000 Construction equipment 150,000 $ 700,000 Accumulated depreciation and amortization Building $ 30,000 Furniture and fixtures 40,000 Vehicles 260,000 Construction equipment 120,000 $ 450,000 Net property and equipment $ 250,000 Total depreciation expense for the year ended December 31, 2011 is $65, COMMITMENTS Performance and payment bonds The Company, as a condition for entering into certain construction contracts, has outstanding surety bonds collateralized by contract receivables. 7. RELATED PARTY TRANSACTIONS Note receivable from related party On September 3, 2003, the Company sold its building and land to the Company s sole shareholder. As part of the sale, the Company signed a note receivable with it s shareholder for $77,000. The note stipulates principal and interest payments of $700 per month, with a balloon payment, of approximately $20,000, due September, The note bears interest at 7.00% per annum. The balance due at December 31, 2011 is $62,000. At December 31, 2011, $5,000 of the receivable is reflected as a current asset and the balance of $57,000 is recognized as a long-term asset. Office and land lease -11-

16 NOTES TO THE FINANCIAL STATEMENTS 7. RELATED PARTY TRANSACTIONS (CONTINUED) The Company has a non-cancelable operating lease on the above land and office facilities with Sample Holdings, LLC. Sample Holdings, LLC is 100% owned by the Company s sole shareholder. The operating agreement expires December 31, The base rent requires a monthly payment of $4,000 including sales tax. Total rental expenses for year ended December 31, 2011 is $48,000. The Company has an option to renew the lease for an additional five years. As of December 31, 2011, a schedule of future minimum lease payments due under the non-cancelable operating lease agreements are as follows: Period Ending December 31, Amount 2012 $ 48, , , ,000 $ 192,000 There were no contingencies, minimum rentals or subleases during the year ended December 31, INCOME TAXES AND DEFERRED INCOME TAXES For the year ended December 31, 2011 the provision of income taxes include the following: Current $ 178,000 Provision for deferred income taxes 62,000 $ 240,000 Deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. However, some temporary differences cannot be identified with a particular asset or liability, such as differences between percentage-of-completion and completed contract methods for income recognition on long-term contracts. As of December 31, 2011, the net deferred tax liability is comprised of the following: -12-

17 NOTES TO THE FINANCIAL STATEMENTS 8. INCOME TAXES AND DEFERRED INCOME TAXES (CONTINUED) Federal State Total Current deferred taxes Gross liabilities $ 70,000 $ 17,000 $ 87,000 Non-current deferred taxes Gross liabilities $ 19,000 $ 6,000 $ 25,000 Total deferred taxes $ 89,000 $ 23,000 $ 112,000 The tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows: Long-term contracts (cumulative financial statement revenue greater than tax basis revenue, resulting in a current deferred tax liability) $ 87,000 Depreciation (financial statement net book value greater than tax basis net book value, resulting in a long-term deferred tax liability $ 25,000 Total deferred tax liabilities $ 112,000 For the year ended December 31, 2011, the Company's effective income tax rate is higher than what would be expected if the federal statutory rate were applied to income from continuing operations, primarily due to state taxes, net of federal income tax benefit. 9. LONG-TERM DEBT At December 31, 2011, long-term consist of the following: Note payable to finance company, collateralized by a vehicle, principal and interest due in monthly installments of $1,200. The note bears interest at percent and is due in full by July, $ 20,000 Note payable to finance company, collateralized by equipment, principal and interest due in monthly installments of $1,800. The note bears interest at percent and is due in full by December, ,000 Note payable to finance company, collateralized -13-

18 NOTES TO THE FINANCIAL STATEMENTS 9. LONG-TERM DEBT (CONTINUED) Vehicles, principal payments due in monthly installments of $5,000, plus interest on the unpaid balance at the rate of 7.75% per annum, also payable monthly. The note is due in full February, ,000 Total $ 300,000 Less current portion -75,000 Total long-term debt $ 225,000 A schedule of future minimum principal payments due on long-term debt outstanding at December 31, 2011, is as follows: Year ending December 31, 2012 $ 75, , ,000 Thereafter - $ 300,000 The Company has a $400,000 line of credit commitment from XYZ Bank. Borrowings under the line are secured by contract receivables, property, plant and equipment and the shareholder s personal assets. The line accrues interest at the bank s prime rate plus two percent. The prime rate at December 31, 2011 is 3.25%. There is not a balance outstanding under the line at December 31, The Company shall timely perform and observe the following financial covenants: a. A minimum tangible net worth of $600,000. b. A maximum ratio of total liabilities to tangible net worth of 2.50 to 1. c. A minimum debt service coverage of 1.00: FINANCIAL INSTRUMENTS The Companies financial assets are contract receivables, costs and estimated earnings in excess of billings on uncompleted contract, employee advances, note receivable, shareholder and pre-paid items. The -14-

19 NOTES TO THE FINANCIAL STATEMENTS 10. FINANCIAL INSTRUMENTS (CONTINUED) Company s financial liabilities are trade payables, billings in excess of costs and estimated earnings on uncompleted contracts accrued liabilities and fixed rate loans. It is management s opinion that the Company is not exposed to significant interest rate risk or credit risk arising from any of the aforementioned instruments (long-term assets and debt's interest rate is fixed and reflect market rates). Unless otherwise noted the fair values of these financial instruments are deemed by management to approximate their carrying values. 11. STATEMENT OF CASH FLOW Non-Cash Investing and Financing Activity During the year ended December 31, 2011, the Company did not have any non-cash investing and financing activities that affected assets and liabilities: 12. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The amount considered earned under the percentage of completion method on fixed price contracts is measured by the relationship of cost expended to anticipated final total cost, based on current estimates of cost to complete the project(s). That method is used because management considers total cost to be the best available measure of progress on the contracts. Because of the inherent uncertainties in estimating costs, it is reasonably possible that the Company's recorded estimate of cost to complete the project(s) may change in the near term. 13. BACKLOG The following schedule shows a reconciliation of backlog representing signed contracts in existence at December 31, 2011: Balance, December 31, 2010 $ 1,295,000 New contracts, ,705,000 $ 12,000,000 Less current revenue earned, ,000,

20 NOTES TO THE FINANCIAL STATEMENTS 13. BACKLOG (CONTINUED) Balance, December 31, 2011 $ 1,000,000 In addition, between January 1, 2012 and March 10, 2012, the Company enter into additional construction contracts in the amount of $7,800, SUBSEQUENT EVENT CUT-OFF DATE Management considered March 10, 2012 as the cut-off date regarding consideration of subsequent events analysis and disclosure. The date is the date the financial statements were available for issuance. -16-

21 SCHEDULE 1-SCHEDULE OF CONSTRUCTION OPERATIONS (See Independent Accountant s Review Report) Contracts completed during the year Revenues Cost of Gross Earned Construction Profit Total revenue, costs & gross profit $ 11,200,000 $ 9,600,000 $ 1,600,000 Reflected in prior years -3,000,000-2,550, ,000 Recognized during current year $ 8,200,000 $ 7,050,000 $ 1,150,000 Contracts in process at year end Total revenue, costs & gross profit $ 4,300,000 $ 3,650,000 $ 650,000 Reflected in prior years -1,500,000-1,400, ,000 Recognized during current year $ 2,800,000 $ 2,250,000 $ 550,000 Totals $ 11,000,000 $ 9,300,000 $ 1,700,

22 SCHEDULE 2-SCHEDULE OF COMPLETED CONTRACTS (See Independent Accountant s Review Report) Job No. Job Description Adjusted Contract Price Cost of Construction Gross Profit (Loss) Gross Profit (Loss) In Prior Period Current Gross Profit (Loss) Earned Gross Profit (Loss) Percent 113 Chandler Office $ 1,700,000 $ 1,440,000 $ 260,000 $ 180,000 $ 80, % 115 Central Apts. 1,800,000 1,500, , , , Rancho Market 1,400,000 1,220, ,000 80, , Bell Towers 2,900,000 2,480, , , Strip Center 3,400,000 2,960, , , $ 11,200,000 $ 9,600,000 $ 1,600,000 $ 450,000 $ 1,150,

23 SCHEDULE 3-SCHEDULE OF CONTRACTS IN PROCESS (See Independent Accountant s Review Report) Job to Date Job No. Job Name Adjusted Contract Price Amount Billed Revenues Earned Cost of Construction Gross Profit (Loss) Gross Profit (Loss) in Prior Period 121 Phoenix Office $ 1,550,000 $ 1,290,000 $ 1,305,000 $ 1,105,000 $ 200,000 $ 100, Medical Center 3,750,000 3,145,000 2,995,000 2,545, ,000 - Totals $ 5,300,000 $ 4,435,000 $ 4,300,000 $ 3,650,000 $ 650,000 $ 100,000

24 Management Estimates Current Gross Profit (Loss) Earned Under-Billed (Over-Billed) Percent Done Work Load Remaining Cost to Complete Future Gross Profit (Loss) Final Estimated Gross Profit (Loss) G.P. % $ 100,000 $ 15, % $ 245,000 $ 207,000 $ 38,000 $ 238, % 450,000 (150,000) 79.9% 755, , , , % 15,000 $ 550,000 $ -150,000 $ 1,000,000 $ 847,000 $ 153,000 $ 803,

25 SCHEDULE 4-SCHEDULE OF COST OF REVENUES EARNED (See Independent Accountant s Review Report) COST CATEGORY DOLLAR AMOUNT Direct Cost: Labor and overhead $ 400,000 Material 800,000 Subcontractors 6,800,000 Equipment rentals 100,000 Other direct cost 455,000 Total direct cost $ 8,555,000 Indirect cost: Superintendents $ 250,000 Fringe benefits 30,000 Vehicle expense 60,000 Depreciation 25,000 Insurance 200,000 Repairs and maintenance 40,000 Travel 115,000 Small tools and supplies 25,000 Total indirect cost $ 745,000 TOTAL COST $ 9,300,

26 SCHEDULE 5-SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES Amount Advertising and promotion $ 4,100 Bad debt expense 20,000 Contributions 8,700 Common area expense 2,500 Depreciation 40,000 Dues and subscriptions 18,000 Employee goodwill 10,000 Entertainment and meals 4,900 Insurance 24,000 Licenses and taxes 5,700 Miscellaneous expense 2,600 Office expenses 36,000 Office salaries 116,000 Officer's salary 636,500 Payroll taxes 43,000 Professional fees 28,000 Rent expense 48,000 Repairs and maintenance 6,000 Telephone and utilities 19,000 Travel expense 3,000 Vehicle expense 23, $ 1,099,000