Page 55 - PC Tax RFP

NOTE 2:
THE PERRYCOMPANY OF 7TH AVENUE, INC. NOTES TO REVIEWED FINANCIAL STATEMENTS DECEMBER 31, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
THE PERRY COMPANY
Contract costs include all direct material, subcontractors, and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, travel costs, tools, repairs and depreciation. Selling, general and administrative costs are charged to expense as incurred.
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. As of December 31, 2014 there were $99,797 and $771,510 respectively in these categories.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising costs for the year ended December 31, 2014 was $1,857.
Income Taxes
The Company with the consent of its stockholders has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal income taxes on their respective shares of the Company's income. Therefore, no provision or liability for income taxes has been included in these financial statements.
Depreciation methods and lives used for financial statement purposes (straight line) differ for depreciation methods and lives for tax purposes, and therefore the depreciation expense deducted for tax purposes is different than the amount reflected in these financial statements. (Also see Note 4). However, since the corporation is taxed under the provisions of Subchapter S as stated above there are no adjustments for deferred income taxes.
The Company implemented the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. As of December 31, 2014, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
As of December 31, 2014 the Company’s is subject to U.S. federal income tax examinations by tax authorities for the years of 2014,.2013 and 2012
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