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hi students welcome to my discussion on inventory cash flows thanks for joining me today the example Im using is taken from hundreds 10th edition page 405 to exercise 617 your author has you complete inventory records and all of your calculating hospitals for chapter 6 and since that tends to be a bit confusing for students the first time they did it Id like to make one with you lets Zone in on our data says our requirement is to calculate total cost of goods sold and ending inventory using FIFO lets review our facts on November 2nd we purchased 8 gallons of milk on November 6 we purchased two more we now have 10 gallons and inventory November 8 you sell 3 the question is which three did we sell that makes a difference on the cost under FIFO you would say the first items in or the first items out so if you have 10 and you sold 3 you have 7 left and then you purchase two more 7 + 2 is 9 gallons of varying prices and then finally you sell four of those leaving you with five units an