How does Bb.Q Chicken value its inventories?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
llowance for doubtful accounts of $64,679 for the year ended December 31, 2024.
Inventories:
Inventories are stated at cost on the first-in, first-out method. The Company monitors inventory quantities on hand and records write-downs and reserves for excess and obsolete inventories based primarily on the aging of the forecasted demand of its inventory, future products sales prices, pricing trends and margins. Actual inventory losses may differ from management's estimates, and such differences could be material to the Company's financial position, results of operations, and cash flows. A valuation allowance is provided for obsolete and slow-moving inventory to write cost down to net realizable value, if necessary.
Notes to Consolidated Financial Statements December 31, 2024 and 2023
The valuation allowance is calculated as a percentage of inventory on hand and the Company recor
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
According to the 2025 FDD, Bb.Q Chicken states its inventories at cost using the first-in, first-out (FIFO) method. This is a standard accounting practice where the first units purchased are assumed to be the first ones sold. This method is commonly used in the restaurant industry to manage perishable goods and ensure that older inventory is used before it expires.
Bb.Q Chicken monitors its inventory quantities and records write-downs and reserves for excess and obsolete inventories. This process is based on factors such as the aging of the inventory, forecasted demand, future product sales prices, pricing trends, and margins. This means Bb.Q Chicken actively manages its inventory to account for potential losses due to spoilage or changes in market conditions.
The FDD also notes that actual inventory losses may differ from management's estimates, which could materially affect the company's financial position, results of operations, and cash flows. To address this, Bb.Q Chicken provides a valuation allowance for obsolete and slow-moving inventory, writing the cost down to its net realizable value if necessary. In 2024, the company recorded an inventory reserve of $39,524 for this valuation allowance. This indicates that Bb.Q Chicken takes a proactive approach to account for potential inventory losses, which can help provide a more accurate financial picture.