Laserfiche WebLink
Green Demolition Contractors, Inc. <br />Notes to the Financial Statements (cont'd) <br />2. Summary of Significant Accounting Policies (cont'd) <br />Revenue Recognition (cont'd) <br />This method is used because management considers total cost to be the best available <br />measure of progress on contracts. Because of inherent uncertainties in estimating costs, it <br />is at least reasonably possible that the estimates used will change significantly within the <br />near term. Contracts are fixed price. The payment terms and conditions in customer <br />contracts vary. <br />Payment typically is due over time in installments, based on project phases as specified in <br />the contracts. Final payment is due when all performance obligations identified in the <br />contract are completed. <br />Cost Recognition — Contract costs include all direct material, subcontractor and labor costs <br />and those material indirect costs related to contract performance. Provisions for estimated <br />losses, if any, on uncompleted contracts are made in the period in which such losses are <br />determined. Changes in job performance, job conditions, and estimated profitability, <br />including those arising from contract penalty provisions, and final contract settlements may <br />result in revisions to costs and income and are recognized in the period in which the <br />revisions are determined. Mobilization costs incurred that include the initial costs to move <br />equipment, personnel and supplies to a job site are insignificant. <br />The contract asset represents revenues recognized in excess of amounts paid or payable <br />(contract receivables). The contract liability represents the Company's obligation to perform <br />on completed contracts with customers for which the Company has received payment or for <br />which contract receivables are outstanding. <br />Contract Receivables — Contract receivables from performing construction projects are <br />carried at their estimated collectible amounts. When payment of the retainage is contingent <br />upon the Company fulfilling its obligations under the contract it does not meet the criteria to <br />be included in contracts receivable and remains in the contract's respective contract asset <br />or contract liability, determined on a contract -by -contract basis. Retainage for which the <br />Company has an unconditional right to payment that is only subject to the passage of time <br />are included in contracts receivable. The Company provides an allowance for doubtful <br />collections which is based upon a review of outstanding receivables, historical collection <br />information, and existing economic conditions. Payments on invoices are due 30 days after <br />the issuance of the invoice. Contract retentions are due 30 days after completion of the <br />project and acceptance by the owner. Delinquent receivables are written off based on <br />individual credit evaluations and specific circumstances of the customer. At December 31, <br />2021, the Company considered $140,000 of contract receivables to be uncollectible and is <br />recognized as an allowance for doubtful accounts. <br />Property and Equipment — Property and equipment are recorded at cost less accumulated <br />depreciation. Assets are depreciated over their estimated useful lives that range between <br />five and seven years. Costs of maintenance and repairs are charged to expense when <br />incurred. <br />-7- <br />