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1 —BASIS OF CONSOLIDATION
It is the policy of the Company to include in the consolidated
financial statements the accounts of its subsidiaries, all of which
were wholly-owned at December 31, 1956, and to reflect in
consolidated income subsidiary operations from dates of acquisition of control. Consolidated earned surplus at December 31,
1956 included $3,959,208.52 representing the combined undistributed net earnings of consolidated subsidiaries, less
depreciation and amortization on a $1,221,688.52 excess of
cost of securities acquired over net assets thus acquired of the
consolidated subsidiaries, which excess has been applied as
additional cost of fixed assets in consolidation.
2—INVESTMENTS
Installment sales contract and other notes were received by the
Company in connection with sales of various properties since
1952 and, with the exception of two notes totaling $1,517,500
at December 31, 1956, security therefor was received in the
form of either first, second, chattel or real estate leasehold
mortgages. These notes require various periodic payments and
their maturities range from December 29, 1957 to July 1, 1976.
As at December 31, 1956, the required payments receivable
for the next five years approximated $2,882,260, 1957;
$2,587,630, 1958; $2,611,270, 1959; $2,440,330, 1960; and
$1,809,830, 1961.
It is the Company's policy to defer the profit on those sales
that qualify as installment sales under Treasury regulations,
taking into income that portion of the profit as applies to payments received on the installment sales contract in the year in
which such payments are received. At December 31, 1956,
$19,092,518 of such profit was deferred, and, accordingly,
during the next five years as the aforementioned payments are
received, there will be included in income (taxable at the then
effective long-term capital gains rate) the following: $1,793,610,
1957; $1,612,751, 1958; $1,625,447, 1959; $1,638,370, 1960;
and $1,312,724, 1961.
During the year 1956, three property sales were made that
did not qualify as installment sales for tax purposes and the
total profit, approximating $2,764,800 was taken into income.
Among other considerations in these sales, the Company received, in one instance, a 3% unsecured note, payable serially,
for $1,380,000 maturing March 1, 1960, paid down to
$1,205,000 at December 31, 1956, and in another instance,
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