The Gansac Publishing Company signed a contract with an author to publish her book. The signing took place on January 1, 2007 and a payment of $20,000 was made. The agreement was that the author would receive 10% of the selling price of $10 per book. The company expects sales of the book to be 100,000 copies in 2007, 80,000 in 2008, and 20,000 in 2009. It incurred production costs of $800,000 for 200,000 copies during 2007.

Required
1. Prepare journal entries to record the preceding events during 2007 and 2008, assuming that sales were as projected.
2. How would your answer change if the projected sales were considered to be “probable”?