What are some significant estimates used in the preparation of Cd One Price Cleaners' financial statements?
Cd_One_Price_Cleaners Franchise · 2025 FDDAnswer from 2025 FDD Document
nistrative support to affiliated entities involved in the operation, support and development of CD One Price Cleaners locations.
As of December 27, 2024, the Company had 52 locations open in the United States, all of which are franchise locations.
Pervasiveness of Estimates – The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and operations at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. Certain significant estimates used in the preparation of these financial statements include the following:
The Company records investments at fair value. The ultimate realization of the investments is based upon future economic factors related to the investments.
Cash – Cash consists of bank deposits in federally insured accounts. On December 27, 2024, the deposits in excess of federally insured limits totaled $20,802.
Receivables – Receivables consist primarily of amounts due from franchisees for royalty payments and amounts dues from affiliated entities with the same controlling ownership as the Company. The Company does not charge interest or late fees on amounts past due. The Company estimates the allowance based on an analysis of specific franchisees, adjusted for current conditions and reasonable forecasts, taking into consideration the age of past due accounts and an assessment of the franchisee's ability to pay. The Company has not established an allowance for doubtful accounts at December 27, 2024 and December 29, 2023. Accounts deemed uncollectible are charged to expense. There were no amounts due over 90 days at December 27, 2024 or December 29, 2023.
1. Summary of Significant Accounting Policies (cont'd)
Investments – The Company's investments are accounted for at fair value with unrealized gains and losses reported in the statement of activities.
Source: Item 22 — Contracts (FDD page 72)
What This Means (2025 FDD)
According to Cd One Price Cleaners' 2025 Franchise Disclosure Document, the preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and operations. Actual results could differ from those estimates. One significant estimate used in the preparation of these financial statements is how the company records investments at fair value, as the ultimate realization of the investments is based upon future economic factors related to the investments.
In addition, the company estimates the allowance for doubtful accounts based on an analysis of specific franchisees, adjusted for current conditions and reasonable forecasts, taking into consideration the age of past due accounts and an assessment of the franchisee's ability to pay. For the fiscal years 2024 and 2023, Cd One Price Cleaners did not establish an allowance for doubtful accounts.
Cd One Price Cleaners also uses estimates for the depreciation and amortization of property and equipment, computed using the straight-line method over the estimated useful life. The estimated lives are 7 years for office furniture, 3 to 5 years for computer equipment, 5 years for computer software and 10 years for leasehold improvements. These estimates are important for prospective franchisees to understand as they can impact the financial performance and valuation of Cd One Price Cleaners.