[krise177]

Highlight Company purchases the right to use a certain piece of music from the musician. It hopes to make this its “signature song” so it will be a long-term relationship, the contract stating five years. The agreed upon price is $750,000, with no stated interest rate. Highlight could borrow money at 5 percent interest currently. The arrangement states that Highlight will make a down payment on 1/1/X2 of $150,000, and pay $150,000 at the beginning of the following four years, making this an annuity due.

a. Record the journal entry to record the copyright on 1/1/X2.


b. Record the journal entries to record interest expense and amortization expense on 12/31/X2, 12/31/X3, 12/31/X4, and 12/31/X5