# Annuity

1. Calculate the present value of each of the following amounts at the given criteria. Assume that the payment is made at the beginning of the period (annuity due).

Payment per Period Interest Rate Number of Periods Present Value

Don't use plagiarized sources. Get Your Custom Essay on
Annuity
Just from \$13/Page

\$30,000 5% 8 years

\$60,000 4% 7 years

\$25,000 8% 10 years

\$56,000 6% 4 years

2. 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.

c. Record the journal entries to record the payments on 1/1/X3, 1/1/X4, 1/1/X5, and 1/1/X6.