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East Street Limited Partnership <br /> Notes to Financial Statements <br /> December 31, 2012 and 2011 <br /> Other Assets <br /> Other assets consist of financing costs and tax credit fees that have been capitalized. Financing costs are being <br /> amortized over the life of the mortgage using the straight-line method of amortization. Tax credit fees are being <br /> amortized over the compliance period using the straight-line method of amortization. <br /> Advertising and Marketing <br /> Advertising and marketing costs are expensed as incurred. <br /> • <br /> Reclassifications <br /> Certain amounts have been reclassified in the 2011 financial statements to be comparative with amounts reported <br /> in 2012. These reclassifications have no effect on net loss or partners' equity. <br /> Subsequent Events <br /> The Partnership has evaluated subsequent events through March 12, 2013,the date which the financial statements • <br /> were available to be issued. <br /> Note 2 - Restricted Deposits and Funded Reserves <br /> 2012 2011 <br /> Replacement reserve $ 12,499 $ 7,802 <br /> Insurance escrow 11,313 10,398 <br /> Shortfall reserve 14,382 14,382 <br /> Operating reserve 48,950 48,940 <br /> $ 87,144 $ 81,522 <br /> Replacement Reserve <br /> Pursuant to the partnership agreement,the Partnership is required to establish a replacement reserve account and <br /> make monthly deposits increasing by three percent annually. The required yearly deposits to the replacement <br /> reserve during 2012 and 2011 were$4,707 and$4,570, respectively. The replacement reserve is to be used for <br /> capital expenditures to replace existing assets of the Partnership. <br /> Replacement reserve activity for the years ended December 31, 2012 and 2011 is as follows: <br /> 2012 2011 <br /> Balance, January 1 $ 7,802 $ 3,232 <br /> Deposits 4,696 4,570 <br /> Interest 1 - <br /> Balance, December 31 '$ 12,499 $ 7,802 <br /> 7 <br />