Pismo Coast Village, Inc. (Company) is a recreational vehicle camping resort. Its business is seasonal in nature with the fourth quarter, the summer, being its busiest and most profitable.

Inventory has been valued at the lower of cost or market on a first-in, first-out basis. Inventory is comprised primarily of finished goods in the general store and in the RV shop.

Depreciation of property and equipment is computed using the straight-line method based on the cost of the assets, less allowance for salvage value, where appropriate. Depreciation rates are based upon the following estimated useful lives:

Building and park improvements								5 to 40 years
Furniture, fixtures, equipment, and leasehold improvements								3 to 31.5 years
Transportation equipment								5 to 10 years

The earnings (loss) per share are based on the weighted-average number of shares outstanding at the end of each reporting period. The Company does not have any potentially dilutive securities issued or outstanding.

For purposes of the statement of cash flows, the Company considers all highly liquid investments including certificates of deposit with a maturity of three months or less when purchased to be cash equivalents.

At December 31, 2011, the Company had cash deposits in excess of the $250,000 federally insured limit with Mission Community Bank of $1,302,534; however, in the past the Company has used Excess Deposit Insurance Bond which secures deposits up to $1,500,000. It has recently been stated by bank regulators that this insurance bond is not enforceable. The FDIC’s Temporary Transaction Account Guarantee Program provides unlimited coverage for non-interest bearing accounts until December 31, 2013. Mission Community Bank is participating in the Temporary Liquidity Guarantee Program which is a requirement to obtain the non-interest bearing coverage.

The Company uses the asset-liability method of computing deferred taxes in accordance with Accounting Standards Codification (ASC) Income Taxes topic. ASC 740 requires, among other things, that if income is expected for the entire year, but there is a net loss to date, a tax benefit is recognized based on the annual effective tax rate.

ASC 740 also requires, among other things, the recognition and measurement of uncertain tax positions based on a “more likely than not” (likelihood greater than 50%) approach. As of December 31, 2011, the Company did not maintain any uncertain tax positions under this approach and, accordingly, all tax positions have been fully recorded in the provision for income taxes. It is the policy of the Company to consistently classify interest and penalties associated with income tax expense separately from the provision for income taxes. No interest or penalties associated with income taxes have been included in this calculation, or separately in the Statement of Operations and Retained Earnings, and no significant increases or decreases are expected within the following twelve-month period. Although the Company does not maintain any uncertain tax positions, tax returns remain subject to examination by the internal Revenue Service for fiscal years ending on or after September 30, 2007 and by the California Franchise Tax Board for fiscal years ending on or after September 30, 2006.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

The Company’s revenue is recognized on the accrual basis as earned based on the date of stay. Expenditures are recorded on the accrual basis whereby expenses are recorded when incurred, rather than when paid.

The Company follows the policy of charging the costs of non-direct response advertising as incurred. Advertising expense was $12,556 and $20,343 for the three months ended December 31, 2011 and 2010, respectively. There was no advertising expense capitalized in prepaid expense.

Subsequent events have been evaluated through February 14, 2012, which is the date the financial statements were available to be issued.

During 2011, the Financial Accounting Standards Board (FASB) issued 12 Accounting Standards Updates (ASUs). The ASUs amend previously issued authoritative guidance and are effective for interim and annual periods beginning after December 15, 2011 and later. The guidance in these updates will not have a material impact on the Company’s financial position or results of operations.

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES