What was the 'Provision for income taxes' for Cornwell Quality Tools in 2023?
Cornwell_Quality_Tools Franchise · 2025 FDDAnswer from 2025 FDD Document
| Raw materials | $ | 5,749,223 | $ 5,882,360 | |----------------------------|-----------|------------|------------------| | Work in process | | 3,037,244 | 3,503,205 | | Finished goods | | 36,364,498 45,150,965 | 40,537,244 49,922,809 | | Less: Obsolescence reserve | | 613,052 | 392,256 | | | $ | 44,537,913 | $ 49,530,553 | 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 increased the provision for income taxes by $540,500 in 2023 and $685,000 in
Source: Item 23 — RECEIPT (FDD pages 101–373)
What This Means (2025 FDD)
According to Cornwell Quality Tools' 2025 Franchise Disclosure Document, the income tax effect increased the provision for income taxes by $540,500 in 2023. This increase is related to the change in inventory value, calculated using statutory federal and state tax rates.
This means that Cornwell Quality Tools' tax liability, as reported on their income statement, was higher by $540,500 in 2023 due to the way they value their inventory. The company uses the LIFO (last-in, first-out) method for its consolidated financial statements, which can result in different tax outcomes compared to other inventory valuation methods like FIFO (first-in, first-out).
For a prospective franchisee, this information provides insight into Cornwell Quality Tools' accounting practices and how they manage their tax obligations. While this specific figure may not directly impact a franchisee's day-to-day operations, it contributes to the overall financial health and stability of the company, which can indirectly affect franchisees. Understanding the company's approach to inventory valuation and its impact on income taxes can be a useful part of assessing the franchise opportunity.