What was the change in LIFO reserve for Cornwell Quality Tools in 2021?
Cornwell_Quality_Tools Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2022 | 2021 | |
|---|---|---|
| Raw materials | $ 5,882,360 | $ 6,198,060 |
| Work in process | 3,503,205 | 3,427,525 |
| Finished goods | 40,537,244 | 29,744,156 |
| 49,922,809 | 39,369,741 | |
| Less: Obsolescence reserve | 392,256 | 280,000 |
| $ 49,530,553 | $ 39,089,741 |
The income tax effect has been provided on the increase/decrease in inventory value at the statutory federal and state tax rates. The tax effect deferred tax assets by $2,459,000 in 2022 and $1,774,000 in 2021. The tax effect increased the provision for income taxes by $685,000 in 2022 and $387,000 in 2021.
The Company uses
Source: Item 23 — RECEIPT (FDD pages 101–373)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Cornwell Quality Tools uses the LIFO (last-in, first-out) method for its historical consolidated financial statements. The document states that the income tax effect has been provided on the increase/decrease in inventory value at the statutory federal and state tax rates.
Specifically, the tax effect deferred tax assets by $2,459,000 in 2022 and $1,774,000 in 2021. The tax effect increased the provision for income taxes by $685,000 in 2022 and $387,000 in 2021.
For a prospective Cornwell Quality Tools franchisee, this indicates that changes in inventory value can have a significant impact on the company's tax liabilities and deferred tax assets. Understanding the LIFO method and its implications for inventory management and tax planning could be important for assessing the financial health and stability of Cornwell Quality Tools.