Use the following information for questions 86 through 88.

Gorman Construction Co. began operations in 2010. Construction activity for 2010 is shown below. Gorman uses the completed-contract method.

Billings Collections Estimated

Contract Through Through Costs to Costs to

Contract Price 12/31/10 12/31/10 12/31/10 Complete

1 $3,200,000 $3,150,000 $2,600,000 $2,150,000

2 3,600,000 1,500,000 1,000,000 820,000 $1,880,000

3 3,300,000 1,900,000 1,800,000 2,250,000 1,200,000

88. Which of the following should be shown on the balance sheet at December 31, 2010 related to Contract 3?

a. Inventory, $200,000

b. Inventory, $350,000

c. Inventory, $2,100,000

d. Inventory, $2,250,000

Answer is A

**Can someone explain why?**