Question: 1. For a company like Radio Shack, what does the balance of Cost of Goods Sold in the income statement represent? What does the balance of Inventory in the balance sheet represent?
2. Cheryl believes that companies report cost of goods sold and ending inventory based on actual units sold and not sold. Her accounting instructor explains that most companies account for cost of goods sold and ending inventory based on assumed units sold and not sold. Help her understand why companies are allowed to do this.