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Imagine you are a financial advisor with a client in the wholesale produce business that just completed its first year of operation. Due to weather conditions, the cost of acquiring produce to resell escalated during the later part of this period. Your client, Bozrah Produce, mentions that because the business sells perishable goods, it has striven to maintain a First In, First Out (FIFO) physical flow of goods. Although sales are good, the increasing cost of inventory has put the business in a tight cash position. The CFO has expressed concern regarding the ability of the business to meet income tax obligations.
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