Shem soft Software Technicians recently accepted a contract to develop an inventory management system for Chez and Company. Shem soft is required to complete the installation of the new inventory management system in two years. Shem soft provided the following contract information.

Prepare the journal entries required for each year of the contract assuming Shem soft uses the percentage- of-completion method and the cost- to- cost approach for measuring progress.

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Contract price 1,500,000 2015 2016 Actual construction costs incurred during the year S 255,000 800,000 Construction costs incurred in prior years Cumulative construction costs incurred to date 255,000 $1.055,000 Estimated costs to complete Estimated total costs 0 255,000 382,500 S 637500 $1.055,000 S 900,000 S600,000 $ 750,000 S 750,000 Progress bilings made during the year Cash collections during the year