Gorman Construction Co began operations in 2010 Construction

Gorman Construction Co. began operations in 2010. Construction activity for 2010 is shown below. Gorman uses the completed-contract method Billings Through 12/31/10 Collections Through 12/31/10 Contract Contract Price Costs to Est. Cost 12/31/10 tocomplet $3,200,000 $3,150,000 $2,600,000$2.150,000 2 3 3,600,000 ,500,000 3,300,000 1,900,000 1,000,000 1,800,000 820,000 $1,880,000 2,250,000 1,200,000

Solution

5. b. present value of the minimum lease payments or the fair value of the asset, whichever is lower.

6. a. Contra Current assets account

8. b. income is recognized when the cash received from the sale of the product is greater than the cost of the product.

Explanation- Under cost recovery method, a business does not recognize any income related to sale transaction until such time as the cost element of the sale has been paid in cash by the customer.